Legal Memorandum on the confirmation for DDE and the draft asset purchase agreement.

Mr. Z

Address….

Dear Sir,

RE:     Legal Memorandum on the confirmation for DDE and the draft asset purchase agreement.

We refer to your email dated 04 January 2006 on the above subject. In this legal memorandum, we have dealt with the following:

Part 1: Confirmation for DDE and the draft asset purchase agreement.

Part 2: Email from Mr. A, General Manager Company 1, to Mr. X. claiming that COMPANY 2 has made certain ‘verbal warranties’ and requested for written confirmation of the same.

Part 1: Confirmation for DDE and the draft asset purchase agreement.

Confirmation for DDE:

Company 3, the local legal counsel of Company 4 (“Company 4”) has asked COMPANY 2 (“COMPANY 2”) to provide a confirmation for DDE (“the Confirmation”).

In this regard, Company 3 has sent a draft confirmation for the perusal of COMPANY 2. COMPANY 2 has revised and edited this draft confirmation and has sent it to us for our legal vetting.  There are some overlaps between the Confirmation and the Warranties in Schedule 5 of the Draft Asset Purchase Agreement (“the Agreement”) however after discussion with Mr. X. on the 14-01-2007 we are of the opinion that:

The following are our observations regarding the Confirmation:

1.      Although Clause a of the Confirmation partially covered in Article 6.1.1 of Schedule 5 of the Agreement we are of the opinion that local COMPANY 2 has not objection accepting the clause with slight modifications. We have tailored Clause a to be more specific.

2.      We are of the opinion that, the words ‘onerous covenants’ in Clause d of the Confirmation may be deleted as this is covered by Article 8.2.8 of Schedule 5.

3.      We are of the opinion that Clause f of the Confirmation may be deleted as a new lease agreement has been executed in relation to the property located at Maijdee.

4.      We are of the opinion that Clause p of the Confirmation may be deleted as this is covered by Article 4.3 of Schedule 5.

5.      Please note that, during the discussion with Mr. X. of COMPANY 2 on 21 January 2007, we were informed that although COMPANY 2 will transfer all computer hardware to Company 4 on 1 January 2008, COMPANY 2 will only provide Company 4 licence to use the their software (which has been developed and is owned by COMPANY 2) up to 31 December 2007.  After 31 December, Company 4 will no longer be allowed to use the software supplied by COMPANY 2. Hence the software is not one of the assets to be transferred.

We have revised the Confirmation in consultation with Mr. x. of COMPANY 2. The revised version of the Confirmation is attached herewith.

Part 2: Email from Mr. Brett Marshall to Mr. Sarwar A. Khan claiming that COMPANY 2 has made certain ‘verbal warranties’

Mr. A, General Manager Company 4., in his email dated 17 January 2007 to Mr. X. stated that COMPANY 2 had made certain ‘verbal warranties’ and have included in his email ten such verbal warranties.

Mr. A, in his email, also requested COMPANY 2 to arrange written confirmation for the ‘verbal warranties’. From our discussion with Mr. X, it is clear that there may have been some miscommunication with regard to the ‘verbal warranties’ and our comments of the ‘verbal warranties’ are as follows:

‘Verbal Warranty’

 Comments
a)      It does not use any suppliers of raw materials in its manufacturing business and there are, therefore, no existing contracts with any persons or corporation entities in this respect; This warranty is not relevant for the due diligence of the distribution business of COMPANY 2.
b)      Goods are not supplied to the COMPANY 2 on terms that allows the supplier to retain ownership pending payment; COMPANY 2 (Distribution) do not get any supplies from any third party supplier. As such, this warranty is not applicable.
c)      There are no standard terms and conditions of sale or supply. The terms of sale or supply depend on the nature of the entity to which the goods manufactured by COMPANY 2 are sold; COMPANY 2 does have standard terms and conditions of sale and supply. However, these standard terms and conditions may vary from time to time depending on the nature of the entity to which the goods are sold by COMPANY 2.
d)      There are no employee handbooks, rules and policies issued to employees which affect employment;

e)

 COMPANY 2 has an employee handbook named “HR Policies” containing its service rules and policies which is readily available from their HR Department to all employees of COMPANY 2. Additionally, an extract of the relevant part of the HR Policies is provided to the employee at the time of joining the Company.
f)        There are no standard employment contract used by COMPANY 2; COMPANY 2 has standard employment contracts for each class/grade of employees.

Nevertheless, among different class/grade of employees certain terms of employment may differ.
g)      There is no provision for any pension, retirement benefit, life assurance, sick pay or disability plan, scheme or arrangement operated by COMPANY 2 for any of its employees; COMPANY 2 has provisions for pension for its managerial and administrative employees.

On the other hand, COMPANY 2 provides gratuity for its workers in accordance with Bangladesh Labour Act 2006. Managerial and administrative employees are not entitled to the same under the Act.

COMPANY 2 has provisions for life assurance for its employees. COMPANY 2 provides sick pay, disability plan, scheme or arrangement in accordance with Bangladesh Labour Act 2006.
h)      Ex Gratia payments or other payments had not been made for termination of employment in the years 2004, 2005, and 2006 and none are still outstanding; COMPANY 2 did not terminate any of its employees during 2004, 2005 and 2006 and no ex gratia payment has been made to any employee.
i)        There are no voluntary pension schemes in existence; Correct.
j)        There is no arrangements for making of any pension or ex gratia payments to employees or former employees; There are no arrangements for making ex gratia payments to employees or former employees. However, COMPANY 2 does have a pension scheme for its managerial and administrative employees and a gratuity scheme for its workers.
k)      There are no redundancy or severance schemes or arrangements in existence or proposed. Correct.

If you have any further query, please do not hesitate to contact the undersigned.

Thanking you,

Yours truly,

………………….

For: “The Lawyers & Jurists”

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