Horwood Marcus & Berk, Chtd.
180 North LaSalle Street - Suite 7300
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A purchase option agreement is a legal document that gives an investor or a tenant the exclusive right to decide whether or not to purchase a property during a set period of time. This period of time is usually set in the future and varies in length dependent on what is known as the option period.
A purchase option agreement is typically used in real estate dealings like rent-to-own agreements or offering franchisees of a franchised company the option to purchase rights to other locations at a future date. These agreements can cover residential real estate or commercial properties.
Below is a list of common sections included in Purchase Option Agreements. These sections are linked to the below sample agreement for you to explore.
Purchase Option Agreement
Great White Shark Enterprises, LLC
Tulip Group Investments, Limited
Dated as of June 12, 2008
PURCHASE OPTION AGREEMENT
This Purchase Option Agreement (this “ Agreement ”) is made as of June 12, 2008 (the “ Effective Date ”) by and among Leisurecorp, LLC, a Dubai limited liability company (“ Leisurecorp ”), Great White Shark Enterprises, LLC, a Florida limited liability company (“ GWSE ”) and Tulip Group Investments, Limited, a B.V.I. company (“ TGI ”).
WHEREAS, as of the date hereof, GPS Industries, Inc., a Nevada corporation (“ GPSI ”) and TGI have entered into that certain Convertible Promissory Note (the “ Convertible Note ”) and all applicable exhibits and attachments thereto (all of the foregoing, together with the schedules and exhibits to all of the foregoing, the “ Transaction Documents ”); and
WHEREAS, as consideration in part for TGI’s desire and willingness to enter into the Transaction Documents, the parties hereto desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS.
“ Business Day ” means any day other than Saturday, Sunday or days on which financial institutions located in New York City, New York are generally closed for business.
“ Common Shares ” means the shares of common stock of GPSI, par value $0.001 per share.
“ Grantors ” means Leisurecorp and GWSE, respectively.
“ Option Exercise Period ” means the period beginning on the date hereof and ending October 12, 2009.
“ Option Shares ” means the shares of GPSI’s Series B Preferred Stock subject to the Option.
“ Person ” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a business or other trust, a joint venture, or any other business entity.
“ Per Share Purchase Price ” means $10.00 per share of GPSI’s Series B Preferred Stock.
“ Purchase Price ” means with respect to GWSE or Leisurecorp, as applicable, the number of Option Shares elected to be purchased by TGI times the Per Share Purchase Price.
“ Series B Preferred Stock ” means the series B preferred stock of GPSI, with the right and preferences set forth in the series B preferred stock certificate of designation.
“ Warrants ” means the warrants subject to the Option in Section 2(a) .
2. PURCHASE OPTION .
(a) Grant of the Option . Leisurecorp and GWSE, severally but not jointly, hereby grant TGI the exclusive right and option (the “ Option ”) to purchase up to (i) 700,000 shares of GPSI’s Series B Preferred Stock and Warrants to purchase up to 28,688,525 Common Shares, in each case held by Leisurecorp and (ii) 300,000 shares of GPSI’s Series B Preferred Stock and Warrants to purchase up to 12,295,082 Common Shares, in each case held by GWSE, exercisable at any time during the Option Exercise Period, pursuant to the terms and subject to the conditions of this Agreement, provided that such Option Shares and Warrants shall be shares of Series B Preferred Stock and Warrants originally purchased by GWSE and Leisurecorp, respectively, in November 2006. Any exercise of the Option, whether in whole or in part, by TGI shall be allocated among the Grantors such that seventy percent (70%) of any purchase of Option Shares and Warrants shall be purchased from Leisurecorp and thirty percent (30%) of any purchase of Option Shares and Warrants shall be purchased from GWSE. By way of example, if TGI were to exercise the Option in part for 500,000 Option Shares and Warrants to purchase 20,491,804 Common Shares, then of those amounts Leisurecorp would provide 350,000 Option Shares and Warrants to purchase 14,344,263 Common Shares and GWSE would provide 150,000 Option Shares and Warrants to purchase 6,147,541 Common Shares.
(b) Ratio of Option Shares and Warrants . The Option shall only be exercisable for Option Shares and Warrants together, and not separately, based on the following ratio: 1 Option Share : Warrants to purchase 40.983607 Common Shares. As an example, if TGI were to exercise the Option (i) in full, it would acquire 1,000,000 shares of Series B Preferred Stock and Warrants to purchase 40,983,607 Common Shares or (ii) in part (using 50% for purposes of this example), it would acquire 500,000 shares of Series B Preferred Stock and Warrants to purchase 20,491,803.5 Common Shares.
(c) Acknowledgement . GPSI hereby acknowledges, accepts and approves the grant of this Option to TGI.
3. EXERCISE OF THE OPTION .
(a) Notice of Intent to Exercise Purchase Option . Provided that TGI has fulfilled or is in process of fulfilling its obligations pursuant to the Transaction Documents and is not in material default under any of its obligation thereunder, TGI may exercise the Option, in whole or in multiple parts, at any time during the Option Exercise Period by delivering written notice to each of the Grantors (the “ Exercise Notice ”), in the form attached hereto as Exhibit A .
(b) Purchase of Option Shares and Warrants . Following receipt of the Exercise Notice, the closing (the “ Closing ”) of the purchase of the Option Shares and Warrants shall take place as soon as reasonably practicable, as determined by the mutual agreement of the parties. At the Closing, (i) each Grantor shall transfer all of its respective rights, title and interest in the Option Shares and Warrants to TGI pursuant to the instructions provided in the Exercise
Notice and (ii) TGI shall deliver to each Grantor its respective Purchase Price. Each party hereto hereby agrees to execute and deliver all documents or instruments reasonably necessary to effectuate the Closing, including the purchase agreement substantially in the form attached hereto as Exhibit B .
(c) Certain Tax Matters . Prior to each purchase of Option Shares and Warrants, the Grantors shall cause GPSI to provide (and GPSI acknowledges and agrees that it will provide) to TGI a statement, in the form and manner set forth in U.S. Treasury regulation section 1.1445-2(c), to the effect that GPSI is not a U.S. real property interest (a copy of which shall be provided by the Grantors to the U.S. Internal Revenue Service in accordance with U.S. Treasury regulation section 1.897-2(h)(2)); in the event such statement is not provided, TGI shall be entitled to withhold U.S. federal income tax on amounts payable to the Grantors to the extent required by the Internal Revenue Code of 1986, as amended, and the U.S. Treasury regulations promulgated thereunder (unless the Grantors are otherwise able to establish an exemption from U.S. federal income tax withholding).
4. RIGHT OF FIRST OFFER .
(a) Grant of Right . At any time prior to May 8, 2012, if either Leisurecorp or GWSE intends to sell any (i) shares of Series B Preferred Stock (other than the Option Shares) at a price per share of less than the Per Share Purchase Price or (ii) warrants to purchase Common Shares (other than the Warrants), then in either case, Leisurecorp or GWSE, as applicable, shall first offer TGI the right to purchase such shares and/or warrants from Leisurecorp or GWSE, as applicable, at the same price and on the same terms and conditions as those which would be offered to a third party (the “ Right of First Offer ”).
(b) Notice; Exercise of Right . Leisurecorp and GWSE, as applicable, shall provide written notice to TGI of their respective intention to sell shares and/or warrants that are subject to the Right of First Offer, which notice shall include the price and other material terms they would be willing to accept for such shares and/or warrants (the “ Offer Notice ”). TGI shall have ten (10) Business Days from the date of its receipt of the Offer Notice (the “ ROFO Period ”) to consider exercising its Right of First Offer. In the event that TGI determines to exercise its Right of First Offer, TGI shall deliver a written notice to Leisurecorp or GWSE, as applicable, within the ROFO Period informing them that TGI elects to exercise its Right of First Offer and proposing a closing date for such transaction within fifteen (15) Business Days from such date of election. In the event that TGI does not exercise its Right of First Offer, Leisurecorp or GWSE, as applicable, may consummate the transaction contemplated by the Offer Notice so long as the transaction is consummated within sixty (60) Business Days of the expiration of the ROFO Period. If either (i) the terms and conditions of the applicable transaction change in any material way, including without limitation, a reduction in the price payable for the shares and/or warrants, from that which are set forth in the Offer Notice or (ii) the applicable transaction is not consummated within sixty (60) Business Days of the expiration of the ROFO Period, then neither Leisurecorp nor GWSE, as the case may be, shall enter into any agreement with respect to, or consummate, any sale of such shares and/or warrants that are subject to the Right of First Offer to any third party without providing a new Offer Notice to TGI and repeating the foregoing process set forth in this Section 4 above.
5. CONVERSION . In the event that TGI exercises its Option and subsequently converts all or any portion of its Series B Preferred Stock into Common Shares, each of Leisurecorp and GWSE hereby agrees to convert the same proportional amount (relative to the total number of shares of Series B Preferred Stock owned by it prior to such conversion) as TGI has converted of their Series B Preferred Stock into Common Shares (relative to the total number of shares of Series B Preferred Stock owned by it before giving effect to TGI’s conversion).
6. VOTING RIGHTS . In the event that TGI exercises the Option in full (for the avoidance of doubt, meaning TGI elects to purchase all Option Shares and Warrants subject to the Option), the parties hereto agree to cause GPSI to amend the certificate of designation with respect to the Series B Preferred Stock to delete section 6(b) thereto.
7. COVENANT . Each Grantor irrevocably covenants that during the Option Exercise Period, such Grantor shall not sell, contract to sell, transfer, mortgage or dispose in any manner any of the Option Shares and Warrants subject to the Option, or allow any placement thereon as a security interest.
(a) Construction . This Agreement and the performance of the transactions and the obligations of the parties hereunder will be governed by and construed and enforced in accordance with the laws of the State of Nevada, without giving effect to any choice of law principles.
(b) Counterparts . This Agreement may be executed by facsimile or electronic “.pdf” signature pages and in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
(c) Notices . All notices, demands, or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given or made when (i) delivered personally to the recipient, (ii) transmitted by facsimile with receipt confirmation to the recipient (with hard copy sent to the recipient by reputable overnight courier service (charges prepaid) that same day; or (iii) one business day after being sent to the recipient by reputable overnight courier service (charges prepaid). Such notices, demands, and other communications shall be sent to the address for such recipient indicated below:
Tulip Group Investments, Limited
Attention: Masoud Sangi
Facsimile: 04 332 8451
Horwood Marcus & Berk, Chtd.
180 North LaSalle Street - Suite 7300