Put and Call Rights Clause


Summary

This Put and Call Rights clause contemplates put and call rights for a warrant. A warrant, like an option, is a security that entitles the holder to buy the underlying stock of the issuing company at a fixed price until the designated expiry date. Puts and calls may be characterized as redemptions in preferred stock or an acceleration of payment in convertible indebtedness. A put right gives the stockholder the right to sell its shares back to the issuer at a guaranteed minimum price, thereby providing the stockholder with a relatively secure exit from the investment. As a result, put rights enhance the value, marketability and attractiveness of a security. A call right is the mirror image of a put right: the issuer has the right to buy back its shares from the stockholder at a certain price. For the issuer, call rights provide a ready mechanism, without the need for protracted or difficult negotiations, to redeem a security that may in the future be dilutive of junior securities or ...