Heads of Agreement (HOA) / Heads of Terms (HOT) - Sale of Business

The document titled 'Heads of Agreement (HOA) / Heads of Terms (HOT) - Sale of Business' is a crucial agreement that outlines the general terms and conditions of a proposed acquisition of a proportion% interest in a target business. The document is entered into by two parties, referred to as the 'buyer' and the 'seller'. The buyer's principal place of business is located at the buyer's address, while the seller's principal place of business is located at the seller's address.

 

The document begins by stating the purpose of the agreement, which is to set out the terms and conditions of the proposed acquisition and to facilitate the successful completion of the transaction. It emphasizes that the parties will make every effort to agree on the detailed terms of the acquisition based on the principles outlined in the document.

 

The document is divided into several sections, each addressing a specific aspect of the proposed transaction. These sections include:

 

1. The Proposed Transaction: This section provides an overview of the acquisition, stating that the buyer will acquire a proportion% interest in the target business, including all necessary assets used in its operations. It also mentions that the buyer may change the name of the target after the completion of the transaction.

 

2. Purchase Price and Payment Terms: This section outlines the aggregate consideration to be paid by the buyer for the acquisition, including the purchase price and the payment terms. It specifies that the purchase price will be paid in currency and may be subject to adjustments based on the net asset value of the target.

 

3. Transition Period: This section discusses the period following the execution of the agreement, referred to as the transition period. It states that the seller will cooperate with the buyer to ensure the continued operation of the target business during this period. It also mentions that the current management of the target will remain in place, with new board members appointed by the buyer.

 

4. Due Diligence: This section highlights the importance of conducting due diligence before proceeding with the transaction. It states that the buyer is responsible for completing the due diligence within a specified period and that the proposed transaction is subject to the satisfactory completion of due diligence.

 

5. Termination: This section outlines the circumstances under which the proposed transaction may be terminated. It states that the transaction will not proceed to completion if certain conditions are not met within a specified period. It also mentions that the deposit paid by the buyer may be non-refundable in certain circumstances.

 

6. Closing Conditions: This section specifies the conditions that must be fulfilled before the completion of the transaction. It mentions that the target must continue its business as usual and that the approval of the target and other necessary documents must be obtained.

 

7. Fees: This section discusses the reimbursement of due diligence costs and expenses in the event that the transaction does not proceed to completion. It states that the buyer is responsible for reimbursing these costs, except in cases of fraud by the seller.

 

8. Third Party Approvals: This section highlights the importance of obtaining any necessary third-party consents or approvals before completing the transaction. It mentions specific consents that may be required, such as consents of other partners and relevant regulatory authorities.

 

9. Confidentiality and Announcements: This section emphasizes the need for confidentiality and restricts the disclosure of information obtained during the negotiation and implementation of the acquisition. It also requires the parties to obtain prior written approval for any public announcements or press releases.

 

10. Dispute Resolutions: This section states that any disputes arising from the agreement will be subject to the jurisdiction clause. It also mentions the requirements for giving notices and serving legal proceedings.

 

11. No Rights of Third Parties: This section clarifies that the terms of the agreement cannot be enforced by any third party.

 

12. Legal Obligations: This section specifies that the agreement represents the good faith intentions of the parties but is not legally binding. It states that the proposed transaction will only proceed when definitive legally binding transaction documents are agreed upon and executed.

 

13. Taxes and Stamp Duty: This section assigns the responsibility for taxes and stamp duty to each party involved in the transaction.

 

The document concludes with the signatures of the authorized representatives of the buyer and the seller, indicating their agreement to the terms outlined in the agreement.

How to use this document?

To use this document effectively, follow these steps:

1. Familiarize yourself with the entire document: Read the entire document carefully to understand its purpose and the terms and conditions outlined.

2. Understand the proposed transaction: Pay close attention to the section discussing the proposed transaction. Identify the proportion% interest to be acquired and the assets included in the acquisition.

3. Determine the purchase price and payment terms: Review the section on purchase price and payment terms. Note the aggregate consideration to be paid by the buyer and any adjustments based on the net asset value of the target.

4. Plan for the transition period: Take note of the section on the transition period. Understand the responsibilities of the seller and the buyer during this period, including the continuation of the target's operations and the appointment of new board members.

5. Conduct due diligence: Follow the guidelines outlined in the due diligence section. Ensure that the due diligence process is completed within the specified period and that all necessary information is obtained.

6. Be aware of termination conditions: Familiarize yourself with the circumstances under which the proposed transaction may be terminated. Understand the implications of termination, including the potential non-refundability of the deposit.

7. Fulfill closing conditions: Take note of the closing conditions specified in the agreement. Ensure that the target continues its business as usual and that all necessary approvals are obtained.

8. Reimburse due diligence costs if necessary: If the transaction does not proceed to completion, be prepared to reimburse the seller for due diligence costs and expenses as outlined in the fees section.

9. Obtain third-party approvals: Identify any third-party consents or approvals that may be required. Work diligently to obtain these approvals in a timely manner.

10. Maintain confidentiality: Adhere to the confidentiality requirements outlined in the agreement. Keep all information obtained during the negotiation and implementation of the acquisition confidential.

11. Resolve disputes according to the jurisdiction clause: If any disputes arise, refer to the jurisdiction clause for guidance on resolving them. Follow the requirements for giving notices and serving legal proceedings.

12. Seek legal advice if necessary: If you have any questions or concerns about the document or the proposed transaction, consult with a legal professional to ensure compliance with applicable laws and regulations.

Please note that this guidance is provided for informational purposes only and should not be considered legal advice. It is recommended to seek professional legal counsel for specific legal advice related to your situation.