Call Option Agreement Precedent
CALL OPTION AGREEMENT
Introduction remarks:
Call option is a standard feature in an investment by a pre-IPO investor. It allows the Option Holder to exercise the call option and require the Grantor to sell the Call Option Shares to the Option Holder.
This precedent Call Option Agreement is signed between the shareholder(s) of the company with the investor simultaneously with the Subscription Agreement and the Shareholders’ Agreement. In this precedent Call Option Agreement, the Option Holder can exercise the Call Option upon the company obtaining the necessary regulatory approvals for the proposed listing of the Company.
Please exercise caution when using / adopting this template for any other use, as this template is specific for a proposed listing exercise of a startup company. Seek your legal counsel’s advice at all times.
If you do not understand the meaning of the terms used in the Call Option Agreement, do refer to the glossary at ______for their meanings.
The writer of this document can be reached at and .
The writer is Ms Siti Zurina Sabarudin, a Partner in a law firm, Azmi & Associates, and is an expert in crowdfunding and compliance for startups.
Disclaimer:
The writer of this document and the firm to which the writer is attached to disclaims all liabilities, losses, claims and / damages due to relying on the contents of the template document in concluding / negotiating a transaction.
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Call Option Agreement Precedent
DATED ______
BETWEEN
THE PERSONS / COMPANY REFERRED TO IN PART B OF SCHEDULE 1
(the “Grantor”)
AND
THE PERSONS / COMPANY REFERRED TO IN PART C OF SCHEDULE 1
(the “Option Holder”)
CALL OPTION AGREEMENT[(in respect of shares in [INSERT COMPANY NAME])
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Call Option Agreement Precedent
TABLE OF Contents
RECITALS 1
1. DEFINITIONS AND INTERPRETATIONS 1
2. CALL OPTION 5
3. CONDITIONS OF EXERCISE 5
4. COMPLETION 6
5. REPRESENTATIONS AND WARRANTIES 6
6. PUBLIC LISTING 7
7. CONFIDENTIALITY 7
8. REMEDIES 7
9. ASSIGNMENT 8
10. SEVERANCE 8
11. AMENDMENT AND VARIATION 8
12. RELEASE AND INDULGENCE 8
13. GOVERNING LAW AND JURISDICTION 8
14. COSTS AND EXPENSES 8
15. CONTINUING EFFECT OF AGREEMENT 9
16. TIME OF ESSENCE 9
17. NOTICES 9
18. ENTIRE AGREEMENT 9
19. DEFAULT & SPECIFIC PERFORMANCE 9
Schedule 1 11
Details of the Company, Grantor(s) & Option Holder 11
Schedule 2 12
Form Of Call Option Notice 12
Schedule 3 13
Call Option Price Formula 13
Schedule 4 14
Communication Details Of The Parties 14
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Call Option Agreement Precedent
CALL OPTION AGREEMENT
THIS AGREEMENT is dated and is entered into
BY AND BETWEEN:-
1. THE PERSONS / COMPANY REFERRED TO IN PART B OF SCHEDULE 1 (hereinafter collectively referred to as the “Grantor(s)”);
AND
2. THE PERSONS / COMPANY REFERRED TO IN PART C OF SCHEDULE 1 (hereinafter collectively referred to as the “Option Holder”).
(The Grantors and Option Holder are hereinafter collectively referred to as the “Parties” and individually referred to as “Party”).
RECITALS
(A) The Company is a private company with its liability limited by shares incorporated in Malaysia on [Insert Date] under the Companies Act 1965. The details of the Company are more particularly set out in Part A of Schedule 1 of this Agreement.
(B) The Grantor(s) are as at the date hereof, the legal and beneficial owners of the ordinary shares of which the details are set out in Part B of Schedule 1.
(C) Pursuant to the Subscription Agreement, the Grantor(s) have agreed to irrevocably and unconditionally grant to the Option Holder the Call Option relating to the Call Shares in accordance with the terms and conditions of this Agreement.
(D) The Parties have agreed to enter into this Agreement to set out the terms and conditions of the call option described in Recital C above.
NOW IT IS HEREBY AGREED BETWEEN THE PARTIES AS FOLLOWS:
1. DEFINITIONS AND INTERPRETATIONS
1.1 Save for the following words and expressions which shall have the following meanings respectively, all defined terms in this Agreement shall have the meaning specified in the OS Subscription Agreement:-
“Call Option” / means the call option granted by the Grantor to the Option Holder under this Agreement, pursuant to which the Option Holder has the right to require the Grantor to sell to the Option Holder during the Call Option Period, upon the terms and conditions of this Agreement, the Call Option Shares at the Call Option Price;“Call Option Period” / means the period commencing on the date the Company has obtained all approvals from the Regulatory Authorities necessary for a Public Listing and expiring either:
(a) 30 days later; or
(b) on [Insert Date];
whichever is the earlier date to occur.
For the avoidance of doubt, the Call Option Period shall not commence until and unless the Company has obtained all approvals from the Regulatory Authorities necessary for a Public Listing;
“Call Option Price” / means the consideration payable by the Option Holder to the Grantor for the Call Option Shares computed in accordance with the Call Option Price Formula set out in Schedule 3 and which is subject to adjustment to be determined by the Grantor to factor in any changes in the par value of the Ordinary Shares;
“Call Option Shares” / means such number of Ordinary Shares which are registered in the name of the Grantor on the date of the Notice of Exercise and which are equal to [Insert Value]% of the total number of Ordinary Shares;
“Change of Control” / means any person or group of persons who has or have Control of the subject company, ceasing to have such Control, and/or any person or group of persons who previously did not have Control of the subject company acquiring such Control;
“Company” / refers to [Insert Company Name & Company Number], a private company with its liability limited by shares, which was duly incorporated in Malaysia under the Act on [Insert Date] and is now existing under the laws of Malaysia and having its registered office at [Insert Address] and its principal place of business at [Insert Address];
“Completion Date” / means in relation to the Call Option, the date on which the sale and purchase of the Call Option Shares is to be completed pursuant to Clause 4;
“Control” / means the power to direct the management and policies of the subject company whether through the ownership of voting capital, by contract or otherwise;
“Dominant Shareholder” / means a person or group of persons who end up as the single largest shareholder of a PLC on completion of a Reverse Take-over Exercise and as a Dominant Shareholder is deemed to have the power to dictate the business direction and management of the PLC;
“ListCo” / means in relation to the Public Listing, the vehicle to be listed, which may be the Company or Newco;
“Newco” / means any company that may be established for the purpose of the Public Listing with the intention that the assets, business and/or undertaking of the Company shall be transferred to such company or that the Company shall be restructured or re-organised as a direct or indirect subsidiary of such company;
“Notice of Exercise” / means a notice of the exercise of the Call Option to be given by the Option Holder to the Grantor when he exercises the Call Option, substantially in the form set out in Schedule 2;
“Ordinary Shares” / means the ordinary shares of par value RM[Insert Amount] each as at the date of this Agreement in the issued and paid-up share capital of the Company and the expression “Ordinary Share” means an ordinary share in the capital of the Company which pursuant to the completion of the subdivision of the Ordinary Shares will reflect the par value of RM[Insert Amount] each;
“OS Subscription Agreement” / refers to the agreement for the subscription of [Insert number of shares] Ordinary Shares by [Insert Company / Persons Name] between the Company, [name of shareholder], [name of shareholder], and [name of shareholder] entered into simultaneously with this Agreement;
“Parties” / means collectively the Grantor and the Option Holder and the term “Party” means either of them as the context may require;
“PLC” / means a corporation listed on the Recognised Stock Exchange;
“Public Listing” / means the official listing and quotation of the entire issued and paid-up share capital of the ListCo on a Recognised Stock Exchange, whether directly or indirectly through the Reverse Take-over Exercise;
“Recognised Stock Exchange” / means any stock or investment exchange identified and agreed to by the shareholders of the Company for the Public Listing;
“Regulatory Authorities” / means the Securities Commission of Malaysia, the Recognised Stock Exchange and such other governmental and regulatory authorities and bodies whose approval is required in respect of the implementation of the Public Listing;
“Reverse Take-over Exercise” / means:-
(a) a situation where a PLC makes an offer for all the Shares by means of an exchange of shares such that, if the offer is accepted, the Shareholders would Control such PLC; or
(b) a situation where a PLC acquires the assets or business of the Company and as a result there is a Change of Control of the PLC through the introduction of a new Dominant Shareholder or group of shareholders;
“Share Swap Exercise” / has the meaning ascribed to it in Clause 6.1.2;
“Shares” / means the shares (whether Ordinary Shares or preference shares) in the share capital of the Company, and the term “Share” means a share in the capital of the Company; and
“Shareholders” / means the holders of shares in the capital of the Company and the expression “Shareholder” means a person who is registered as a holder for the time being of shares in the capital of the Company.
1.2 In this Agreement unless the context otherwise requires:-
(i) “law” includes common law and any constitution, decree, judgement, legislation, order, ordinance, regulation, statute, treaty or other legislative measure in any jurisdiction or any present or future directive, regulation, request or requirement (in each case, whether or not having the force of law but, if not having the force of law, the compliance with which is in accordance with the general practice of persons to whom the directive, regulation, request or requirement is addressed);
(ii) “person” includes any individual, company, corporation, firm, partnership, joint venture, association, organisation, trust, state or agency of a state (in each case whether or not having separate legal personality);
(iii) “consent” includes an approval, authorisation, exemption, filing, license, order, permission, permit, recording or registration (and references to obtaining consent will be construed accordingly);
(iv) the words “hereof”, “herein”, “hereon” and “hereunder” and words of
similar import, when used in this Agreement will refer to this Agreement as a whole and not to any particular provision of this Agreement;
(v) a “day, month or year” will be construed by reference to the Gregorian calendar;
(vi) any reference to a statutory provision will include such provision and any regulations made in pursuance thereof as from time to time modified or re-enacted whether before or after the date of this Agreement;
(vii) words importing the singular number will include the plural number and vice versa and references to natural persons will include bodies corporate and the use of any gender will include the other gender;
(viii) the headings to the clauses hereof will not be taken into consideration in the interpretation or construction thereof or of this Agreement;
(ix) references to Recitals, Clauses and Schedules are references to recitals and clauses of and schedules to this Agreement unless otherwise stipulated;
(x) any reference to this Agreement or any other agreement or deed or document will be construed as a reference to this Agreement or, as the case may be, such other agreement or deed or document as the same may be or have been or may from time to time be amended, varied or supplemented;
(xi) a period of days from the occurrence of an event or the performance of any act or thing will be deemed to exclude the day on which the event happens or the act or thing is done or to be done (and will be reckoned from the day immediately following such event of act or thing), and if the last day of the period is not a Business Day, then the period will include the next following day which is a Business Day; and
(xii) words denoting an obligation on the Option Holder to do any act matter or thing includes an obligation to procure that it be done and words placing the Option Holder under a restriction include an obligation not to permit infringement of the restriction.
1.3 The Schedule to this Agreement and the provisions contained therein will have the same force and effect as if set out in the body of this Agreement.
1.4 A Party who breaches any of the provisions under this Agreement will, where such breach is capable of being rectified or remedied, be afforded the opportunity to rectify or remedy the breach within 30 days of being notified of such breach by another Party. A breach which is rectified or remedied within the said 30 day period will consequently cease to be regarded as a breach.