I'm in the process of working with management to redo the contracts we have with independent agents (don't ask, the ones done by someone else before were a mess).
One clause I think should be added is "first right of purchase". Wording can be tricky - so rather than re-inventing, thought I'd ask if anyone has sample wording they'd be willing to share?
Mahalo
I don't have any sample wording for you, but it might also be referred to as a "right of first refusal" clause. HTH.
From an old generic agreement on file:
a. Upon termination ofthis Agreement, for whatever reason company shall have an option and right of first refusal to purchase Contractor, his heirs and representatives interest in the Book.
b. Company shall exercise its option and right offirst refusal by giving Contractor written notice not later than ten (10) business days after termination of this Agreement that it shall purchase Contractors interest in the Book within sixty (60) business days from said notice. Failure to so exercise shall cause Company's option and right of first refusal to automatically expire.
c. In the event that Company fails to exercise its option and right of first refusal, Contractor shall have the option and right of second refusal to purchase Company's interest in the Book.
d. Contractor shall exercise its option and right of second refusal by giving Company written notice not later that ten (10) business days after expiration ofCompany's option that Contractor shall purchase Company's interest in the Book within thirty (30) business days from said notice. Failure to so exercise shall cause Contractors option and right of second refusal to automatically expire.
e. The price paid by Contractor for Company's interest in the Book and by Company for Contractor's interest in the Book (the "Price") shall be one (1) times the appropriate ownership percentage multiplied by the most recent annualized policy commission paid to Company for personal lines production. The price paid by Contractor for Company's interest in the Book and by Company for Contractors interest in the Book (the "Price") shall be one (1) times the appropriate ownership percentage mUltiplied be the most recent annualized policy commission paid to Company for commercial lines and life production. Calculation of the Price shall be made within thirty (30) business days ofthe termination of this agreement.
f. Contractor or Company, as the case may be, shall pay the Price according to the following terms: Twenty five percent (25%) of the Price in cash on the date ofpurchase, with the unpaid balance to bear interest at the rate ofprime plus one, using the prime rate current at the Bank ofAmerica on the date of purchase. Payment of the unpaid balance ofthe Price shall be evidenced by a promissory note payable in 24 equal monthly installments of principal and interest. The promissory note shall be secured by a first lien on commissions receivable from and on the Book
g. Purchase ofthe Book by either party shall be on a first year retention basis. If a purchase account fails to renew once after the date of purchase, the purchase of that account is nullified and the purchase price is adjusted accordingly. Purchaser shall provide evidence to Seller as requested of any such non-renewals.
h. In the event that neither Contractor nor Company exercises its option to purchase the other party's interest in the Book, then both Contractor and Company shall be free to sell its interest in the Book to third parties at whatever price the market shall bear.
+1 for Terry. Just make sure that nothing in that clause conflicts with anything else in the agreement. And you should also include a sever-ability clause so that one invalid clause does not invalidate the entire agreement. It's probably already there, but noticing it and remarking on it just make you look that much smarter. ;)
Thanks guys - already developed one, sent it to management --- and of course, today when they are making changes with certain producers and space provided or not, suddenly realizing that when I said the contracts need to be redone, I was serious. They had assumed certain things were present that are not, and it looks like some business will be walking out the door. D*&%!