Dated: May 07, 2007
Assistant Vice President &
Head of IT
Rangs Bhaban (8th Floor)
113-116, Old Airport Road
Dhaka – 1000
Re: Vetting of ATM/POS Sharing Agreement among Bank 2., Company 1 and Bank 1
We refer to your letter dated 30 April 2007 on the above subject.
From perusal of the provided documents it appears that you have provided two draft agreements – ATM/POS Sharing Agreement and another untitled agreement. Both draft agreements are supposed to be executed amongst Bank 2. (“BANK 2”), Company 1 (“COMPANY 1”) and Bank 1 (“BANK 1”). We are of the opinion that, as both the agreements have identical parties, it will simplify the process if only one agreement is executed which incorporates all the necessary terms. As such, we have only vetted the ATM/POS Sharing Agreement with a view to protect the interests of BANK 1.
Our comments on the ATM/POS Sharing Agreement is given below.
|General||Please insert the accurate date of the execution of the Agreement at the beginning of the Agreement.|
|Particulars of the Parties||In the particulars of the parties please delete any reference to “Bank Company Act 1991” and replace it with “Bank Companies Act 1991”.|
|Preamble C||In Preamble C after the first sentence please insert the following sentence:
“BANK 1 has its own centralised on-line core banking software that is interfaced with COMPANY 1 switching software according to ISO-8583 messaging standard.”
|Preamble D||In Preamble D delete “BANK 2 and COMPANY 1” and replace it with “BANK 2, COMPANY 1 and BANK 1”.|
|Section 1||In the first line of section 1.1 (a) please delete “from” and replace it with “shall form”.Please include the definitions of the following terms in Section 1:
Settlement Bank, COMPANY 1 Network, Customer Data, Issuing Bank, Acquirer and Merchant Discount Revenue.
In section 1.1 (n) please add the word “relevant” before the word “Authority”.
|Section 2.2||In Section 2.2.1, after the first sentence please add the following sentence:
“BANK 1 shall also allow the usage of its ATM terminals to the Debit/Credit Card holders of BANK 2.”.
Also note that, although it is a commercial issue, we could not find any consideration given in favour of BANK 1 for entering into this Agreement. Please check whether BANK 1 agrees to enter into this agreement without any consideration.
|Section 2.3||In the third line of section 2.3.1, please delete the words “and the Settlement Bank” and replace it with “parties”. In the last line of section 2.3.1 the term “upon responsible prior notice” is vague and as such we suggest you to replace it with “upon _____ (_______)days prior notice”.After section 2.3.1, we suggest you to add the following new section:
“2.3.2 Each Party hereby represents and warrants to and undertakes with the other Party and its successors in title as follows:
a) it is duly incorporated and validly existing under the Law;
b) it has the legal right and full power and authority to enter into and perform this Agreement and any other documents to be executed by it pursuant to or in connection with this Agreement, which when executed will constitute valid and binding obligations on it, in accordance with their terms;
c) the execution and delivery of, and the performance by it of its obligations under, this Agreement and any other documents to be executed by it pursuant to or in connection with this Agreement will not and are not likely to:
i) result in a breach of any provision of its memorandum or articles of association; or
ii) result in a breach of, or give any third party a right to terminate or modify or result in the creation of any Encumbrance under, any agreement, licence or other instrument or of any order, judgment or decree of any court, governmental agency or regulatory body to which it is a party or by which it is bound; and
d) all corporate action required by it validly and duly to authorise the execution and delivery of, and to exercise its rights and perform its obligations under, this Agreement and any other documents to be executed by it pursuant to or in connection with this Agreement has been duly taken.
e) all requisite approvals and permissions for the execution of this agreement have been obtained from the proper authorities.”
|Section 3.3||At the end of the second sentence of Section 3.3, please add “as per rates defined in section 3.1.2 and 3.2.”|
|Insertion of a new Section 5||After Section 4.5, please insert the following new section 5:“5. Indemnity
5.1 In event of default of any of the terms or conditions of this Agreement, the defaulting party shall indemnify the non defaulting parties for any loss, damage or expense incurred and/or suffered by such non defaulting parties in consequence of such default.”
Please renumber the remaining sections accordingly.
|Section 7.2||Please note that, according to section 7.2 the term of the Agreement shall be 3 years. This section also acts as a automatic renewal section, according to which the Agreement shall be automatically renews for successive 1 year terms, unless any party gives a written notice to the other parties at least 90 days prior to the expiration of the initial term or renewal term of its intent to terminate the agreement upon the expiration of such term. Please check whether BANK 1 agrees to this automatic renewal section.The second paragraph of section 7.2, which incorporates the provisions of termination, is vague. Dispute may arise as to what is meant by the term ‘good cause’. Moreover, the notice period for termination under this paragraph, in our opinion, is too long. As such we suggest, that this paragraph be deleted and replaced with the following:
“Termination: Each party shall have the right to terminate this agreement, without assigning any reason whatsoever, by giving 6 (six) months prior notice in writing to the other parties. In the event of default of any of the terms and conditions of this Agreement by any party to this Agreement, the non-defaulting party shall have the right to immediately terminate this agreement by giving written notice to the other parties.”
Apart from the above observations, the terms and conditions of the ATM/POS Sharing Agreement are otherwise in order.
The documents provided are returned herewith.
If you have any further query, please do not hesitate to contact the undersigned.
The Lawyers & Jurists
M.L.Hotel Tower Ltd, 208, Shahid Syed Nazrul Islam Sarani,
Bijoy Nagar, Dhaka-1000.