Option Agreement Legal Forms and Contracts

The following free Option agreement is a very thorough document outlining the option period, amount, time and interest for a partner in a business. Please use the detailed operating agreement also on this site in combination with this document. This agreement and contract is being provided as a sample and example for information and research purposes only, however it is a valid legal contract and agreement. Always consult an Attorney or Lawyer. This Agreement can apply in most states including California, and with some modifications New York, Florida, Nevada and others. Help improve this agreement by leaving a comment.

OPTION AGREEMENT

THIS OPTION AGREEMENT (the “Agreement”) is dated and entered into effective as of __________________ between __________________, LLC a California limited liability company (the “Company”), and __________________, individually (sometimes referred to herein as “__________________” or “Optionee”). This Agreement is made with reference to the following facts:

STATEMENTS OF FACT:

A. Concurrently herewith, __________________, a __________________ limited partnership, as a Class A Member, and __________________, as a Class B Member, have entered into and adopted that certain Operating Agreement for the formation of the Company as a California limited liability company (the “Operating Agreement”).

B. Pursuant to the terms of the Operating Agreement, __________________, as President of the Company, will be providing day-to-day management services in connection with the Company’s opening, ownership, operation and management of a retail shoe store located in __________________, __________________, to be known as “__________________.”

C. __________________ is a Class B Member of the Company holding a __________________ (__________________%) Percentage Interest in the Company.

D. __________________, as Optionee, desires to increase her ownership interest in the Company over time and is a current resident of the State of __________________.

E. As an added incentive to provide the management services to the Company as provided for in the Operating Agreement, the Company desires to provide __________________ with the opportunity to increase her ownership interest in the Company.

F. For this purpose, the Company desires to grant to Optionee an option to acquire, and Optionee desire to acquire from the Company in the future, up to an additional __________________ Percent (__________________%) Percentage Interest as a Class B Member of Company, for the consideration and upon the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and conditions contained herein, and with the intention of being legally bound hereby, the parties hereto agree as follows:

1. Grant of Option. For the consideration described herein, and subject to the terms and conditions of this Agreement, the Company hereby grants to Optionee (or her assignee, as provided for in Paragraph 6(a) below) an option to purchase from the Company (the “Option”) an additional a __________________ Percent (20%) Percentage Interest as a Class B Member of Company, or any security issued by Company in respect thereof (the “Optioned Interest”), at the purchase price and in time and manner set forth herein. This Option shall be exclusive to Optionee and shall be irrevocable by the Company during the Option Period (as defined in Paragraph 3 below), unless this Agreement is sooner terminated in accordance herewith.

2. Purchase Price. The purchase price for the Optioned Interest shall be __________________ ($__________________), payable by check by Optionee to the Company upon the exercise of the Option to purchase as provided in Paragraph 4 below.

3. Option Period; Lapse. Optionee shall have the right to exercise the Option during the period commencing __________________, and ending at __________________ (__________________) p.m. on __________________ (the “Option Period”), unless this Agreement and Option granted hereunder is sooner terminated in accordance herewith. If Optionee fail to exercise the Option for all or any part of the Optioned Interest before the expiration of the Option Period, the Option as to all or any remaining part of the Optioned Interest shall lapse and become null and void without further notice or obligation on the part of the Company.

4. Exercise of Option. Optionee may exercise the Option to purchase the Optioned Interest in increments of __________________ THOUSAND DOLLARS ($__________________), the first two of which shall represent an additional __________________ and __________________ Percent (__________________%) Percentage Interest in the Company and the last of which shall represent an additional __________________ Percent (__________________%) Percentage Interest in the Company, until the entire Optioned Interest is purchased. Optionee may exercise the Option at any time during the Option Period upon thirty (30) days prior written notice to the Company of her intent to exercise the Option. For this purpose, a written Option notice shall be delivered to the Manager of the Company at its principal place of business and accompanied by Optionee’s check representing the purchase price for the Optioned Interest. The Company shall immediately thereafter (subject to the restrictions and qualification provisions set forth in Paragraph 5 below) issue and deliver to Optionee an original endorsed Class B membership certificate of the Company issued in Optionee’s name (or the name of her assignee) representing the Optioned Interest so purchased with the Company’s seal affixed thereto.

5. Termination of Option. The Option granted hereunder and the rights and obligations of each party pursuant to this Agreement shall immediately terminate (i) in the event __________________ is terminated for any reason as President of the Company, or from any other office she then holds with the Company; (ii) upon the death or disability of __________________ which shall be effective coterminously with such event; or (iii) upon the termination, dissolution and liquidation of the Company.

6. Restrictions on Transfer. Optionee hereby acknowledge and agree that the Optioned Interest is subject to the following:

(a) Exclusivity. The Option granted hereunder shall be exclusive to Optionee.

(b) Assignment. Subject to subparagraph (a) above, this Agreement, the Option or the Optioned Interest granted or issued pursuant to this Agreement, or any of the Optionee’s rights or privileges granted hereunder, may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise). Any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the Option or the Optioned Interest, or any portion thereof, or any other rights or interests relating to the Option or the Optioned Interest contrary to the provisions of this Agreement, or upon the levy or any attachment or similar process upon such Option or such rights, shall render the Option and all rights hereunder immediately null and void.

(c) Restrictions on Transfer. The Optioned Interest, when purchased and issued to Optionee, shall at all times be subject to the terms and conditions of, including transfer restrictions contained in, the Operating Agreement of the Company, as may be amended from time to time, and any form of buy-sell agreement hereafter entered into by and among the Company and its Class A Members and/or its Class B Members and any amendments thereto (collectively, a “Buy-Sell Agreement”). Optionee further acknowledge and agree that, at such time as the Optioned Interest is purchased and issued, they will execute any subscription documents as may be required by the Company, making certain investment representations and warranties concerning the sale or transfer of the Optioned Interest in accordance with applicable federal and state securities laws.

7. Effect of Prohibited Transfer. In the event Optionee transfer the Optioned Interest in any manner, whether specifically prohibited by this Agreement or otherwise, the Company shall not be required to do any of the following:

(a) Transfer or cause to be transferred on its books or surrender any certificates evidencing the Optioned Interest for purposes of transfer any or all of the Optioned Interest that shall have been transferred in violation of any of the provisions set forth in this Agreement; or

(b) Treat or cause to be treated as an owner of the Optioned Interest, or to pay distributions to any transferee to whom any of the Optioned Interest, shall have been so transferred.

8. Company=s Representations and Warranties. The Company hereby represents, warrants and covenants with the Optionee as follows:

(a) Company is a limited liability company duly organized and validly existing in good standing in the State of California as of the date of this Agreement, and is authorized to issue Class A Membership Interests and Class B Membership Interests, including the Optioned Interest.

(b) Except for the transfer restrictions contained in the Operating Agreement and any which may be included in any Buy-Sell Agreement hereafter entered into, the Optioned Interest is free and clear of any and all claims, liens, trusts, encumbrances, pledges, security interests, charges, restrictions or any other rights of any other person or entity, and the Company agrees that Optionee shall receive good and marketable title to the Optioned Interest at such time as it exercises the Option, free and clear of the same.

(c) The Company has not granted any other option in connection with the Optioned Interest which is the subject of this Agreement.

(d) This Agreement, when signed by the Company, will be duly executed and delivered and constitute a valid and binding obligation of the Company.

9. Optionee=s Investment Representations. By accepting this Option, the Optionee hereby represents, warrants and covenants with the Company as follows:

(a) The Optionee is a bona fide resident of the State of California and is twenty-one (21) years of age or older.

(b) All of the Optioned Interest purchased or to be purchased under this Agreement shall be for Optionee’s own account for investment purposes only, and not with a view to or for a sale in connection with any distribution of the Optioned Interest in violation of the Securities Act of 1933, as amended (the “Securities Act”), or any rule or regulation promulgated thereunder.

(c) Optionee has had an opportunity she deems adequate to obtain from representatives of the Company the information necessary to permit her to evaluate the merits and risks of her investment in the Optioned Interest.

(d) Optionee has sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the purchase of the Optioned Interest and to make an informed investment decision with respect to that purchase.

(e) Optionee can afford a complete loss of the value of the Optioned Interest and is able to bear the economic risk of holding the Optioned Interest for an indefinite period.

(f) Optionee fully understands that:

(1) None of the Option, the Optioned Interest, the Class A Membership Interests nor the Class B Memberships of the Company have been registered under the Securities Act and are “restricted securities” within the meaning of Rule 144 under the Securities Act;

(2) None of the Option, the Optioned Interest nor the Class B Membership Interest, when purchased by Optionee, can be sold, transferred or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available;

(3) In any event, the exemption from registration under Rule 144 of the Securities Act will not be available for at least two (2) years, and even then, will not be available unless a public market then exists for the Option, the Optioned Interest or the Class B Membership Interest, adequate information concerning the Company is then available to the public, and other terms and conditions of Rule 144 of the Securities Act are complied with; and

(4) No registration statement is now on file with the Securities and Exchange Commission with respect to the Option, the Optioned Interest or the Class B Membership Interest, or any other securities of the Company, and neither the Company have any obligation or current intention to register the same, or cause the same to be registered, under the Securities Act.

10. No Rights or Guarantees of Services. Notwithstanding that __________________ is a current officer of the Company, nothing contained in this Agreement shall be construed as giving the Optionee any right or guarantee to continue to be employed or contracted by the Company or any of its parent or subsidiary entities or affiliates.

11. No Interim Rights as to Optioned Interest. Neither the Optionee, nor her family, executors, administrators, heirs, legatees or assignees (to the extent permitted hereunder), shall have any rights or privileges with respect to the Optioned Interest, unless and until the Optioned Interest have been fully paid by Optionee and duly issued, endorsed, transferred and delivered to Optionee by the Company. Upon the purchase of the Optioned Interest, Optionee (or her permitted assignee) shall be required to execute and become a party to the Operating Agreement and any buy-sell agreement hereafter entered into, and all of her rights as a Class B Member of the Company shall be subject to the terms thereof.

12. General Provisions.

(a) Headings. The paragraph headings as used herein are for convenience only, are not part of this Agreement, and shall be disregarded in construing all or any portion of this Agreement.

(b) Construction. Every covenant, term and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any party hereto.

(c) Severability. If any provision of this Agreement as applied to any party or to any circumstance is adjudged by a court to be void and unenforceable, that shall in no way affect any other provision of this Agreement, the application of such provision in any other circumstances, or the validity or enforce ability of this Agreement as a whole.

(d) Binding Effect. Subject to the restrictions on transfer and assignment set forth herein, this Agreement shall be binding upon and inure to the benefit of the Company and Optionee and her respective spouses, trustees, beneficiaries, heirs, executors, administrators, legal representatives, successors and assigns.

(e) No Third Party Beneficiaries. Except as otherwise provided for in subparagraph (d) above, no rights or benefits under this Agreement are conferred upon, directly or indirectly, or shall in any way inure to the benefit of, any third party who is not a signatory to this Agreement.

(f) Entire Agreement. This Agreement, together with all exhibits and supplements hereto, and any other documents incorporated herein or executed concurrently herewith constitute the entire Agreement between the parties hereto with respect to the subject matter hereof, and shall supersede all prior agreements, understandings, warranties, representations and negotiations of any party herein, whether oral or written, concerning the subject matter hereof.

(g) Modification. This Agreement may not be amended, modified or terminated, except in writing signed by each of the parties hereto. All prior agreements, understandings, representations, warranties and negotiations, if any, whether oral or written, regarding the subject matter of this Agreement are merged into this Agreement.

(h) Notices. Any notice, consent, request, demand, approval, waiver, offer or other communication permitted or required under this Agreement shall be in writing and shall, in the case of personal delivery, be deemed received at the time of actual receipt, or if mailed, seventy-two (72) hours after deposit in the United States mail, postage prepaid, addressed to a party at such party=s address as set forth below, or at such other address as that party may specify by written notice given to the other in accordance with this paragraph:

If to the Company:

__________________
__________________
__________________
__________________
__________________
__________________

With Courtesy Copies to:

__________________
__________________
__________________
__________________
__________________
__________________

If to __________________:

__________________
__________________
__________________
__________________
__________________
__________________

(i) Waiver. No course of conduct between the parties, and no delay or omission of either party to exercise any right or power given under this Agreement shall (i) impair the subsequent exercise of any such right or power, or (ii) be construed to be a waiver of any breach or an acquiescence in or consent to the cure of any breach while any other breach shall continue to exist, or be construed to be a waiver of such continuing breach or of any other right or power that shall theretofore have arisen. Every power and remedy granted by law and by this Agreement to either party hereto may be exercised from time to time, as often as may be deemed expedient. All such rights and powers shall be cumulative to the fullest extent permitted by law.

(h) Time is of the Essence. TIME IS EXPRESSLY DECLARED TO BE OF THE ESSENCE of each respective obligation and duty of the parties hereunder and in all matters concerning this Agreement, including all acts or things to be done or performed in connection herewith, and of every provision of this Agreement in which time is an element.

(j) Binding Arbitration. Any controversy, dispute or claim arising out of the interpretation, performance or breach of this Agreement shall be resolved by binding arbitration, at the request of either party, in accordance with the rules of the American Arbitration Association then in effect. The arbitrators shall have the power to grant all legal and equitable remedies and award compensatory damages provided by California law, but specifically shall not have the power to award punitive damages. The award may be limited to a statement that one party pay the other a sum of money. The arbitrators shall not be deemed to have exceeded her powers (per California Code of Civil Procedure Sections 1286.2 or 1286.6) by committing an error of law or legal reasoning. The decision of the arbitrators shall be final and unreviewable for error of law or legal reasoning of any kind. The prevailing party in any such dispute or arbitration shall be entitled to receive from the losing party, in addition to any other award, reasonable attorneys= fees and costs incurred in connection with such proceeding or arbitration.

(k) Governing Law. This Agreement and any exhibits attached hereto or amendments hereafter made shall be deemed entered into in the State of California. The validity of this Agreement, its construction, interpretation and enforcement, and the rights and obligations of the parties hereunder, shall be governed by and construed in accordance with the laws of the State of California without giving effect to any conflict of law provision.

(l) Counterparts; Execution. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original Agreement, and all of which shall constitute one Agreement to be effective as of the date of execution of this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed and delivered, or caused to be executed and delivered by a duly authorized representative, this OPTION AGREEMENT as of the day and year first above written, which Agreement, when executed by all parties, shall constitute a valid and binding obligation of each party.

”Company”

__________________, LLC
A California Limited Liability Company

By:
__________________
Its Manager

“Optionee/__________________”

__________________, individually