Legal Opinion on the confirmation for DDE and the draft asset purchase agreement

Mr. Z

Address….

Dear Sir,

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

We refer to your email dated 04 January 2006 on the above subject.

Confirmation for DDE:

With regard to the confirmation for DDE (“the Confirmation”), we concur that there are some overlaps between the Confirmation and the Warranties in Schedule 5 of the Draft Asset Purchase Agreement (“the Agreement”). As such, we suggest the following:

1.      As the terms of Clause a of the Confirmation is covered by Article 6.6.1 of Schedule 5 of the Agreement, we suggest the deletion of Clause a.

2.      We suggest that the words ‘onerous covenants’ in Clause d of the Confirmation 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 serves no purpose as a new lease agreement has been executed in relation to the property located at Maijdee. As such, we suggest the deletion of this clause.

4.      We suggest that the words ‘and employees of different grades in respect of distribution operations’ in Clause p of the Confirmation be deleted as this is covered by Article 4.3 of Schedule 5.

We have gone through the Confirmation and we shall finalise the same with the assistance of Mr. X.

Employee Termination:

With regard to the termination of the employees, we have been informed by COMPANY 1 that the relevant employees shall resign on their own accord from COMPANY 1 with effect from 1st February 2007 and as such, COMPANY 1 will not be required to terminate their employment. In connection with resignation by the worker, we would like to inform you that section 27 of Bangladesh Labour Act 2006 shall apply. According to section 27 (1), a permanent worker may resign by giving 60 days written notice to the employer. If the permanent worker wants to resign without giving any notice then he shall have to pay wages to the employer in lieu of that notice (section 27 (3)). According to section 27 (4), in case of resignation, the permanent worker shall be entitled to compensation at the rate of –

a)      If he had worked for a continuous period of more than 5 (five) years but less than 10 (ten) years, 14 (fourteen) days pay for every completed year of service; or

b)      If he had worked for a continuous period of 10 (ten) years or more, 30 (Thirty) days pay for every completed year of service;

Or Gratuity, if any, which ever is higher.

The draft resignation letters to be submitted by the employees are in compliance with Bangladesh Labour Law.

Regarding the insertion of a re-employment clause in the termination letters, this no longer applies, as there will not be any terminations but resignations. It is not possible to insert a similar clause in the resignation letters as they will be from the employees.

Clause 5.1 of the Agreement relates to termination of the Employees. As there will not be any terminations, this Clause needs to be amended so that it reflects the fact that the employees would resign of their own accord.

Leases:

We have perused the Lease Agreements and the expiry dates of the current leases are as follows:

Lease between Date of Lease Agreement Duration of Lease Expiry Date
…………………………… 30 March 2006 6 years commencing from 1 September 2006 31August 2012
………………………… 17 December 2006 3 years from 1 August 2006 31 July 2009
………………………….. 24 August 2006 5 Years from 1 June 2003 31 May 2008
……………………… 28 September 2006 3 Years from 1 October 2006 31 September 2009
……………………….. 29 August 2006 2 years from 1 August 2006 31 September 2008
……………………….. 27 December 2006 5 years from 1 July 2004 31 June 2009
………………………….. 2 March 1998 10 years from 1 July 1998 21 June 2008
…………………………….. 26 September 1999 10 years from 1 November 1999 31 October 2009
a)   …………………b)  ……………………… 1 September 19951 September 1995 12 years from 1 September 199512 years from 1 September 1995 31 August 200731 August 2007
…………………….. 31 Jaunuary 2005 4 years from 1 January 2005 31 December 2008
…………………… 28 June 2000 5 years from 1 July 2002 31 June 2007

Regarding the leases and the sub-lease of the same, we are of the opinion that if the sub-leases are to be on a back-to-back basis then the covenants of Zuellig, which will be the same as the head-lease, will be acceptable. Please note that, all the lease agreements, except the agreements between Mr. ………… and Glaxo Bangladesh Ltd. (Fittings and Fixtures of the building) dated 1 September 1995 and that between Mr. ………………. dated  28 June 2000, have a sub-let clause, which states that sub-let will not be allowed without the prior written consent of the Lessor. It is up to COMPANY 1, whether or not they would retain this sub-let clause in the sub-lease agreements. If COMPANY 1 decides to keep the clause then Zuellig will be able to further sub-lease the properties with COMPANY 1’s permission provided COMPANY 1 first obtains permission from the head-lessor for the further sub-lease.

Please note that there are different renewal and termination clauses in different leases. These are listed below:

Lease between Date of Lease Agreement Renewal and Termination clauses
……………………… 30 March 2006 It can be renewed by giving at least 1-month’s written notice before expiry of the lease by either party.Either party may terminate it by serving 3 months prior notice to the other party. (Clause 6)
…………………… 17 December 2006 It can be renewed by giving at least 1-month’s written notice before expiry of the lease by either party.The lessee with 2 months prior notice may terminate it. (Clause 6)
………………… 24 August 2006 It can be renewed by giving at least 1-month’s written notice before expiry of the lease by either party. (Clause 6)The lessee can terminate the lease by giving 3 month’s prior notice in writing (Clause 7(f)).
………………….. 28 September 2006 It can be renewed by giving at least 1-month’s written notice before expiry of the lease by either party. (Clause 7)The lease may be earlier determined without penalty by ninety days notice from the lessee. (Clause 6)
Lease between Date of Lease Agreement Renewal and Termination clauses
…………………….. 29 August 2006 It can be renewed by giving at least 1-month’s written notice before expiry of the lease by either party. (Clause 7)The lease may be earlier determined without penalty by ninety days notice from the lessee (Clause 6). BUT Clause 7 conflictingly states that it may be terminated by either party by giving 2 months prior written notice to each other.
…………………………. 27 December 2006 It can be renewed by giving at least 1-month’s written notice before expiry of the lease by either party. (Clause 6)It has no termination clause.
………………………. 2 March 1998 It can be renewed by giving at least 1-month’s written notice before expiry of the lease by either party. (Clause 6)The lessee can terminate the lease by giving 3 month’s prior notice in writing (Clause 7(e)).
………………… 26 September 1999 It can be renewed by giving at least 1-month’s written notice before expiry of the lease by either party. (Clause 6)The lessee can terminate the lease by giving 3 month’s prior notice in writing (Clause 7(e)).
1.   ……………2.   ……………….. 1 September 19951 September 1995 It has no renewal clauseIt has no termination clause.

It can be renewed by giving at least 1-month’s written notice before expiry of the lease by either party. (Clause 6)

Either party can terminate the lease by giving 3 month’s prior notice in writing to the other party (Clause 7(d))Lease between Date of Lease Agreement Renewal and Termination clauses………………..31 January 2005It can be renewed by giving at least 1-month’s written notice before expiry of the lease by either party. (Clause 7)The lease may be earlier determined without penalty by ninety days notice from the lessee. (Clause 6)……………………..28 June 2000The lessor may on request in writing made by the lessee six months before the expiry of the lease renew the same. (Clause 3 (e))The lessee can terminate the lease by giving 6 month’s prior notice in writing. (Clause 4(d))

In all the lease agreements it is stated that in case of any dispute it shall be resolved through arbitration in accordance with the provisions of the Arbitration Act 1940. As at present arbitration is regulated under the Arbitration Act 2001, we suggest that in the sub-lease agreements this should be rectified.

Regarding insurance policies, the lease agreements do not require insurance to be taken out and Bangladeshi law does not impose any requirements for insurance policies to be in place. But it is our opinion that, in order to protect its interest, COMPANY 1 in the sub-lease agreements, may impose the requirement to take out insurance on Zuellig.

Clause 6.1:

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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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