Preliminary Agreement To Takeover Business Legal Draft Template

AGREEMENT

is made at... this... day of... between Mr. A carrying on business at....

hereinafter referred to as 'the Vendor' of the One Part and Mr. X, Mr. Y and

Mr. Z all carrying on business at... hereinafter referred to as 'the Promoters'

of the Other Part;WHEREAS

-1. The Vendor is

carrying on business as sole proprietor of manufacturing some products

mentioned in the First Schedule hereunder written hereinafter referred to as

'the said products.'2. The Vendor is

carrying on the manufacture of the said products at his factory premises at...

and which premises consist of a plot of land with a factory shed and other

incidental structures thereon and which are more particularly described in the

Second Schedule hereunder written.3. A detail inventory of

the machinery, tools, equipment and other articles and things in the said

factory is given in the Third Schedule hereunder written.4. The Vendor has

represented and hereby declares that the said factory premises, machinery etc.

are mortgaged to the Bank of... to secure a term loan of Rs.... with interest

at... per cent per annum but: except that there is no other encumbrance on the

said property.5. The Vendor is

handicapped with shortage of funds and knowing this the Promoters have

approached the Vendor with a proposal that the Promoters will form and register

a private company limited by shares under the Companies Act, 1956, and the

Company will take over the said business of the Vendor together with all the

assets belonging thereto on the following terms and conditions to which the

Vendor has agreed.NOW

IT IS AGREED BETWEEN THE PARTIES HERETO AS FOLLOWS:1. The Promoters shall

form and register a private company limited by shares under the Companies Act,

1956 and they will be the first subscribers to the Memorandum & Articles of

Association of the Company.2. The name of the

Company will be... being the name in which the Vendor is carrying on his said

business, subject to the same being approved by the Registrar of Companies

at... If the said name is not approved, such other name will be given to the

Company as will be acceptable to the Vendor and approved by the Registrar of

Companies.3. The authorised or

nominal capital of the Company will be Rs.... divided into... equity shares of

Rs. 100/- each.4. The draft of the

Memorandum & Articles of Association of the said Company has been kept

ready and approved by the parties hereto. The main object of the said Company

will be to take over the said business of the Vendor as a going concern together

with the assets mentioned in the Second and Third Schedule hereunder written

but subject to the said mortgage created in favour of the said Bank of... and

to carry on the business of manufacturing the said products. The incidental and

other objects of the said Company will be as set out in the said draft

Memorandum of Association.5. The said business of

the Vendor together with the said assets and the goodwill thereof but subject

to the said mortgage are valued at Rs.... Out of the said amount a sum of Rs.__

has been paid by the Promoters for and on behalf of and for the benefit of the

said proposed company, to the Vendors, as earnest and out of the balance a sum

of Rs.... will be paid to the Vendor in cash and the remaining amount of Rs....

will be paid and deemed to be paid by allotting equity shares of the face value

of Rs.... each in the capital of the said Company.6. The Vendor will

obtain the consent of the said Bank to the transfer of the said business with

assets to the proposed company and to the company taking over the liability of

the said mortgage on such terms as the Bank may stipulate.7. The costs of and

incidental to the registration of the said Company will be initially spent by

the Promoters and after registration of the Company, they will be reimbursed

out of the funds of the Company.8. On the registration

of the Company the Vendor shall transfer the said business together with the

assets thereof described in the Second and Third Schedule hereunder written

together with all stock-in trade, in consideration of the said sum of Rs.... to

be paid to the Vendor partly in cash and partly by allotment of shares as

aforesaid and he will execute all necessary documents of transfer as will be

required under the legal advice of the lawyers to be appointed by the

Promoters. The capital gains tax if any payable on the transfer of such assets

will be paid by the Vendor and the Vendor will indemnify and keep indemnified

the Promoters as well as the said Company against any such liability.9. All the expenses of

and incidental to such documents of transfer including stamp duty and

registration charges will be borne by the said Company.10. The Promoters and the

Vendor will be the first directors of the said company and one of the promoters

will be the Chairman of the Board of Directors.11. The Vendor will be in

charge of the business of the Company and will make available to the Company

all the know-how and technical expertise. The Vendor will be paid remuneration

as may be decided by the Board but it will not be less than Rs.... per month.12. On the registration

of the Company the Directors shall allot the said shares of the face value of

Rs.... to the Vendor as aforesaid and shall also allot shares of the face value

of Rs.... to each of the said Promoters and which will be payable in cash.13. On registration of

the Company the Board of Directors constituted as aforesaid will adopt this

agreement so as to be binding on the Company and the Company as well as the

Promoters and the Vendor will also execute such document or documents in favour

of the said Bank as may be necessary for taking over the said mortgage

liability by the said Company.14. If the Bank for any

reason refuses to give its consent to the transfer of the said business and the

assets to the company, this agreement will be treated as cancelled. Such

consent will be obtained by the Vendor before the registration of the Company.15. The Vendor agrees and

undertakes that so long as he will be the share holder and director of the

Company he will not start any similar business alone or in collaboration with

any other person or make the know-how and technical expertise available to any

other person.16. The Promoters and the

Vendor as directors of the Company or any of them will not be liable to retire

by rotation. Subject to this, they will be bound by the Articles of Association

and the provisions of the Companies Act.17. Except as aforesaid,

all liabilities outstanding on the date of transfer, in respect of the said

business, if any, and the liabilities by way of income tax, sales tax and other

taxes of the Vendor will be borne and paid by the Vendor and he shall hold the

Promoters and the Company indemnified against the same.THE

FIRST SCHEDULE ABOVE REFERRED TO:x

x x xTHE

SECOND SCHEDULE ABOVE REFERRED TO:x

x x xTHE

THIRD SCHEDULE ABOVE REFERRED TO:x

x x xIN

WITNESS WHEREOF the parties have put their hands the day and year first

hereinabove written.Signed and delivered by the)withinnamed Vendor Mr. B in)the presence of...)Signed and delivered by the)withinnamed Promoters X, Y &)Z in the presence of)