The Put Option Agreement is a crucial financial instrument used in Saudi Arabian markets when parties need to establish downside protection or exit rights for specific assets or investments. This agreement is particularly relevant in scenarios involving strategic investments, joint ventures, or asset disposal arrangements. The document must be structured to comply with Saudi Arabian law, including the Capital Market Law, Companies Law, and critically, Islamic finance principles. The Put Option Agreement typically includes detailed provisions on exercise mechanics, valuation methodologies, and settlement procedures, while ensuring all elements are Shariah-compliant. It's commonly used in corporate transactions where parties need to manage risk or create liquidity options for their investments, making it essential for both financial institutions and corporate entities operating in the Saudi Arabian market.
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1. Parties: Identification of the parties entering into the agreement - the Option Holder (Buyer) and the Option Writer (Seller)
2. Background: Context of the agreement and relationship between the parties
3. Definitions and Interpretation: Key terms used throughout the agreement, including specific financial and Islamic finance terminology
4. Grant of Put Option: Core terms of the put option, including the underlying asset and strike price
5. Exercise Period: Timeframe during which the option can be exercised
6. Exercise Procedure: Detailed process for exercising the option, including notice requirements
7. Settlement Terms: Procedures for completing the transaction upon exercise, including payment and asset transfer
8. Representations and Warranties: Statements of fact and assurances from both parties, including Sharia compliance representations
9. Covenants: Ongoing obligations of the parties during the option period
10. Events of Default: Circumstances constituting default and consequences
11. Termination: Conditions and procedures for early termination
12. Governing Law and Jurisdiction: Specification of Saudi Arabian law and relevant courts
13. Notices: Communication procedures between parties
14. General Provisions: Standard boilerplate clauses including amendments, assignments, and severability
1. Premium Payment Terms: Used when the option involves an upfront or deferred premium payment structure
2. Shariah Board Approval: Required when parties need explicit confirmation of Shariah compliance
3. Third Party Rights: Included when the agreement affects rights of parties not directly involved
4. Tax Provisions: Detailed tax treatment when transaction has significant tax implications
5. Security Arrangements: When collateral or security is required for the option
6. Force Majeure: Provisions for extraordinary events affecting performance
7. Regulatory Compliance: Additional compliance requirements for regulated entities
8. Multiple Exercise Rights: When the option can be exercised in parts or multiple times
1. Schedule 1 - Asset Description: Detailed description of the underlying asset(s)
2. Schedule 2 - Pricing and Valuation: Methodology for determining the strike price and market value
3. Schedule 3 - Exercise Notice Form: Template for option exercise notification
4. Schedule 4 - Calculation Methods: Detailed calculations for payments and adjustments
5. Schedule 5 - Required Documents: List of documents required for settlement
6. Appendix A - Shariah Guidelines: Specific Shariah compliance requirements and principles
7. Appendix B - Regulatory Approvals: Copies of relevant regulatory approvals or requirements
8. Appendix C - Corporate Authorizations: Relevant corporate approvals and resolutions
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