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MEMORANDUM OF UNDERSTANDING

This Memorandum of Understanding is entered into this day of August, 1999 between [1] Mr. Bahadurali S/o. Mr. Hasanali P. Agarwal residing at 2, Satnam Niwas, 1st Floor, Clare Road, Churchgate, Mumbai - 400 008 [2] Mrs. Yasmin Bahadurali Agarwal, W/o Mr. Bahadurali H. Agarwal and residing at 2, Satnam Niwas, 1st Floor, Clare Road, Churchgate, Mumbai - 400 008 and [3] Mrs. Daulat Sadruddin Rahimani W/o late Mr. Sadruddin Jamal Rahimani residing Rahim Castle Building, 3rd floor, Room No.6 & 7,

86, Nishanpada Road, Dongri, Mumbai - 400 009 [all hereinafter collectively referred to as the “Transferors” which expression shall mean and include their respective heirs and legal representatives] of the One

Part And Mr. Sameer Chaudhary, S/o Shri Madanlal Chaudhary residing at 41/42, Parasurampuria Towers, Millat Nagar, Lokhandwala Complex, Andheri (West), Mumbai - 400 053 (hereinafter referred to as the Transferee which expression shall include his heirs and legal representatives) of the Other Part.

WHEREAS :

[A] The Transferors are the shareholders of Paragon Footwear Private Limited, a company registered under the Companies Act, 1956 and having its registered office at A-53, MIDC Industrial Area, Marol, Andheri (East), Mumbai 400 093 (hereinafter called the Company) and hold 300000 [Three Lacs only] equity shares of the face value of Rs.10/- each aggregating to Rs.30,00,000/- (Rupees Thirty Lacs Only), the particulars whereof are more particularly set out in Annexure ‘1’ hereto (hereinafter collectively called “the said shares”);

[B]The total paid up and subscribed equity share capital of the Company is Rs.30,00,000/- (Rupees Thirty Lacs Only) consisting of 300000 shares of Rs.10/- each. The total issued, subscribed and paid up equity share capital of the Company is held by the Transferors as set out in Annexure ‘1’ hereto;

[C]The Company has made a provision in its Balance Sheet in respect of various liabilities as set out in Annexure ‘2’ hereto. The Transferors are in the process of negotiating with all the creditors of the said Company for finalisation and discharge of all the liabilities of the Company;

[D] The Transferees herein are desirous of purchasing the said shares and takeover the said Company and accordingly the Transferors and the Transferee have agreed to record the terms of the Agreement for Sale of the said shares;

[E]In the premises and subject to this Memorandum of Understanding, the Transferors have agreed to sell and transfer and the Transferee has agreed to acquire and purchaser the said shares and take over the Company at or for the total consideration of Rs.221 lacs on the terms and conditions recorded in these presents.

NOW THIS MEMORANDUM OF UNDERSTANDING WITNESSETH AND IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS:

1.The Transferors hereby declare as follows:

[a]That they are the only persons entitled to the said shares and save and except them no other person has any share, right, title, interest whatsoever in, to or upon the said shares or any or more of them;

[b]That they are holding the said shares in their personal capacity and not as trustee or nominee for any one;

[c]That prior to this Memorandum of Understanding they have not agreed to sell, transfer, mortgage or otherwise encumber the said shares or any one or more of them;

[d]That the said shares are free from all encumbrances and charges and that they are entitled to sell and transfer the said shares to the Transferee as is done by this Memorandum of Understanding;

  1. Relying upon the aforesaid declarations, the Transferee has agreed to purchase and acquire from the Transferors the said 300000 equity shares of the said Company and takeover the Company and to pay the consideration that may be fixed by an independent Chartered Accountant/Auditor of the said Company for the said shares. The balance amount will be brought by the Transferee or his nominees either in the form of additional share capital or unsecured loans.

3.The Transferee has agreed to acquire the said shares and the Transferors’ interest in the said Company including the liabilities set out in Annexure ‘2’ hereto at a total consideration of Rs.221 lacs. It is agreed that the total consideration all put together will not exceed more than Rs.221 lacs. All the costs, charges and expenses in respect of the transfer of the said shares and the arrangement contemplated herein shall be borne and paid by the Transferee alone.

4[a]Based on the aforesaid consideration, the Transferee shall deposit the sum of Rs.221 lacs with M&M Legal Venture, Advocates and Solicitors, Mumbai as per the following schedule. TIME BEING ESSENCE OF THE CONTRACT.

On or before signing of this MOU / Rs. 11,00,000.00 / By Pay Order
On or before 31.08.1999 / Rs. 60,00,000.00 / By Pay Order
On or before 30.09.1999 / Rs. 20,00,000.00 / By Pay Order
On or before 31.10.1999 / Rs. 25,00,000.00 / By Pay Order
On or before 30.11.1999 / Rs. 30,00,000.00 / By Pay Order
On or before 31.12.1999 / Rs. 30,00,000.00 / By Pay Order
On or before 31.01.2000 / Rs. 25,00,000.00 / By Pay Order
On or before 30.06.2000 / Rs. 10,00,000.00 / By Bank Guarantee
On or before 31.08.2000 / Rs. 10,00,000.00 / By Bank Guarantee
TOTAL / Rs.221,00,000.00

[b]The said M&M Legal Venture shall upon receiving instructions in writing from the Transferors as well as Transferee discharge various liabilities as set out in Annexure ‘2’ hereto out of the said amount.

[c]In the event of any delay or default committed on the part of the Transferee in making payment of any of the aforesaid instalments, then, in that event, the Transferee shall pay the same with interest at the rate of 15% from the date of default till payment or realization, as the case may be;

[d]It is mutually agreed by and between the parties hereto that upon payment of the first four instalments i.e. Rs.116 lacs as stated hereinabove, the Transferor shall put the Transferee in possession of part of the premises of the Company as occupant/licensee thereof and upon receipt of the balance consideration, the Transferors shall put the Transferee in complete possession of the premises of the Company;

[e]In the event if the Transferee fails and/or neglects to pay the entire amount of consideration of Rs.221 lacs on or before 29th February 2000, then, in that event, both the parties shall have right to jointly dispose off the said shares and the said Company to or in favour of any third party as may be mutually agreed upon;

[f]Till 29th February 2000 the Transferee shall have the option either to take over the said shares and the said Company by making the total balance consideration or to assign the benefits of the contract hereunder to and in favour of any third party in mutual consultation with the Transferors;

[g]On or before 31st January 2000 i.e. upon the payment of the instalment of Rs.25 lacs on or before 31st January 2000, the Transferee shall also issue a bank guarantee to and in favour of the Transferors in the sum of Rs.10 lacs to be invoked by the Transferors on or before 30th June 2000 in the event of delay or default on the part of the Transferee to pay the said amount of Rs.10 lacs on or before 30th June, 2000;

[h]Similarly, on or before 31st January, 2000 the Transferee shall also issue a bank guarantee to and in favour of the Transferors in the sum of Rs.10 lacs with accrued interest thereon for a period of six months i.e. to say a total bank guarantee of Rs.10,90,000/- in favour of the Transferors to be invoked by Transferors on or before 31st August, 2000 in the event of delay or default on the part of the Transferee to pay the said amount of Rs.10 lacs on or before 31st August, 2000;

[i]It is mutually agreed by and between the parties hereto that after the part possession is handed over to the Transferee as stated in sub clause [d] above, all the property taxes and other outgoings in respect of the land and building as well as the Company will be shared by the parties hereto in proportion to their respective use/occupation;

[j]It is further mutually agreed by and between the parties hereto that after major liabilities of the Company are discharged, through M&M Legal Venture, Advocates & Solicitors, Mumbai, those towards Bank, Excise, Income tax, Sales tax, Municipal Corporation and BSES i.e. to say after the amount of Rs.116 lacs is paid by the Transferee on or before 30th November, 1999 as stated hereinabove, the parties hereto shall execute a final agreement in this regard for the purposes of giving effect to the transaction contemplated herein.

  1. It is mutually agreed by and between the parties hereto that the total consideration payable by the Transferee pursuant to this Memorandum of Understanding shall not exceed Rs.221 lacs save and except interest at the rate of 18% for six months on the last instalment of Rs.10 lacs as provided in clause 4(h) above. If there is any liability over and above that amount required to be discharged, then, the same shall be to the Transferors’ account. Similarly, the balance amount remaining after discharge of all the liabilities, the same shall be handed over forthwith to the Transferors with accrued interest thereon, if any.

6. The Transferors shall upon receipt of the second instalment of Rs.60 lacs payable on or before 31st August, 1999 as stated in clause 4(a) hereinabove;

[a] hand over to M/s. M&M Legal Venture, Advocates & Solicitors all the original equity share certificates of the Company held by them and to be transferred in favour of the Transferees together with Transfer Forms duly filled in and executed by the Transferors.

[b]Letters of resignation of all the directors of the Company to be kept deposited with M/s.M&M Legal Venture, Advocates & Solicitors.

  1. For the purpose of implementing this MOU, the Transferors and Transferee agree to procure all the resolutions from all the Board of Directors of the Company and/or the General Meeting of the Company and to execute or get executed all letters of confirmation or such other agreement or arrangements as may be necessary with a view to fully and effectually implement and carry out the intentions hereof.

8.It is mutually agreed by and between the parties hereto that the Transferors shall transfer all the shares held by them in the Company to and in favour of the Transferee and/or his nominee/s at a price to be determined by independent Chartered Accountant/Auditor of the Company. The balance amount will be brought in by the Transferees either in the form of additional share capital or unsecured loans from out of the amount to be deposited as mentioned in paragraph 4 above.

9.The Transferors shall give to the Transferee, a certificate in respect of clear and marketable title of the land and building in which the factory building of the Company is situate. The Transferors state that save and except the liability set out in Annexure ‘2’ hereto there are no other liabilities and that the land is owned by the MIDC and the Company is the lessee in respect thereof. The building constructed thereon belongs to the Company.

  1. The Transferors shall settle all the liabilities including statutory liabilities due to various Government Departments, Development Credit Bank Ltd. and other liabilities including to employees, the Electricity Board, Income Tax, Excise including the assessments proceedings, appeal etc. upto 31.3.1999 and other secured /unsecured creditors and shall furnish a certificate from the Auditors of the Company about the clearance/settlement of the liabilities set out in Annexure ‘2’ hereto. The amount so paid by the said M&M Legal Venture shall be adjusted towards the total consideration and the balance shall be paid forthwith to the Transferors with accrued interest thereon, if any.
  1. The Transferors shall be entitled to remove

[a]all the stocks of raw materials, stock in trade, work in progress and finished goods of the Company whether lying in the factory premises or otherwise.

[b]all the plants, machinery, furnitures, fixtures, dyes and moulds, laboratory equipments, office equipments and other fixed and moveable assets lying in the factory premises or elsewhere and shall be entitled to deal with and/or dispose of the same without being accountable and/or rendering any account thereof to the Transferee and/or the said Company.

  1. The Transferors shall obtain “No Due Certificate” from the Development Credit Bank Ltd. and furnish the same to the Transferee.
  1. The Transferors shall be responsible for all the liabilities till the date of this Memorandum of Understanding and any liabilities which may accrue or raise after the date of this Memorandum of Understanding but pertaining to the period prior to the date hereof shall be borne by the Transferors and the Transferee shall not be responsible in any manner whatsoever for the said liabilities.
  1. [a] The Transferors shall be entitled to all the realisation .from debtors, loans, advances and other assets of the Company including the refund from any Government Authorities including duty draw back and other incentives etc. which has become due and/or which may become due or accrue in respect of the business/manufacturing activities carried on by the Company prior to the date of this Memorandum of Understanding.

[b]It is specifically agreed that, if any amount as and by way of duty draw back, incentives or refund, as the case may be, is received by the Company, then, the Transferee shall cause the said Company to reimburse the same to the Transferors such amount of incentive, duty draw back and/or the refund as the case may be within a week from the receipt of the said amount. In the event of any default the same shall be payable by the Transferee/Company with interest at the rate of 18% p.a. from the receipt of the same by the Company till payment and/or realisation thereof by the Transferors.

  1. It is mutually agreed by and between the parties hereto that the Transferors shall not be entitled to any amount referred to in clause 4 above till such time as the liabilities as set out in Annexure ‘2’ hereto are discharged.
  1. In the event if the Transferee fails and neglects to deposit any amount of instalment as set out in paragraph 4 hereinabove or within such extended period of time as may agreed by the Transferors, then, and in that event, the Transferors shall be entitled to terminate this Memorandum of Understanding and shall be entitled to forfeit such amount as may be mutually agreed.
  1. This Memorandum of Understanding is valid for the period of six months within which period the Transferors shall obtain, settle crystalise and defray the liabilities of the Company as set out in Annexure ‘2’ hereto out of the amount referred to in paragraph 4 above and submit No Due Certificate from Development Credit Bank Ltd. as well as the certificate of clear and marketable title of the Company in respect of land and building in which the factory of the Company is situated.
  1. If the Transferors fail to obtain requisite clearances and settlement of the liabilities within the aforesaid period of six months or any extended period that may be agreed by the Transferee, then, and in that event, the amount paid by the Transferee under paragraph 4 above shall be refunded to the Transferee alongwith accrued interest, if any, thereon without any delay.
  1. The Transferors shall indemnify and keep the Transferee duly indemnified against any debts or liabilities over and above the total consideration of Rs.221 lacs.
  1. The Transferee shall take the entire control over the Company only after receipt of the total consideration by the Transferors as contemplated in this Memorandum of Understanding and shall appoint the Directors of his choice.
  1. It is mutually agreed that this Memorandum of Understanding shall be converted into a suitable legally enforceable binding document upon completion of the formalities and obligations undertaken by the respective parties hereto.
  1. The entire transaction contemplated herein shall be completed on or before 31st January, 2000 or any extended period as may be mutually agreed by and between the parties hereto.
  1. The Chartered Accountants of the Transferee has fully verified the accounts books and balance sheets and profit and loss accounts as well as income tax sale tax and excise records of the Company upto 31st March, 1999 as well as in respect of the provisional balance sheet and the profit and loss account upto 31st July, 1999 and have satisfied themselves about the assets and liabilities of the Company. However, if any claims penalties, fines and other impositions made or levied on the Company, in respect of the assessment for the period upto 31st July, 1999 then, the Transferors shall be exclusively responsible and/or liable for the payment thereof and if the same are for the period before the execution of this Agreement. Thereafter, the new Board of Directors in charge and the Transferees/Company shall be responsible and liable for the same.
  1. The Transferors agree and undertake to sign and execute all papers, documents, forms, applications, declarations, deeds, indemnities, bonds etc. as may be required and necessary by the said Company and/or the Transferee and/or the Government and other authorities and to admit execution of such documents and papers before the authorities concerned and to do all acts, deeds, matters and things in that behalf in order to put the intention of the parties hereto to complete effect.
  1. The Transferors/Transferee agree to procure the registration and transfer of the Transferors’ equity and preference shares in the Company, agreed to be purchased as aforesaid, in favour of the Transferee and/or his nominee or nominees and to do all acts, deeds, matters and things as may be necessary for fully and effectively carrying out the purpose of this Memorandum of Understanding as Transferee may reasonably require.
  1. The Transferee hereby agree and undertake to abide by the Memorandum and Articles of Association of the Company on his/his nominees being admitted as members of the Company.
  1. The parties hereto will make, sign and submit all applications and forms duly filled in to the Company for the purpose of transfer of the said shares in the name of the Transferees/his nominees.
  1. All out of pocket expenses of and incidental to this Agreement and other documents, deeds etc. to be executed including stamp duty and transfer fee, if any, payable shall be borne and paid by the Transferee alone. The parties hereto shall each pay the fees of their respective Advocates & Solicitors.

IN WITNESS WHEREOF the parties hereto have hereunto set and subscribed their respective hands on the day and year first hereinabove written.