Vetting of draft Agreement for Sale of the entire shares of Company

Dated: November 21, 2006

Mr. A

Company Secretary

Company 1

Head Office

Shadhinata Bhaban (1st Floor)

88, Motijheel Commercial Area

Dhaka – 1000

Dear Sir

Re:      Vetting of draft Agreement for Sale of the entire shares of Company 2.

We refer to your letter no. PLC/2006/3730 dated October 30, 2006 on the above subject.

We have perused the draft Agreement for Sale of the entire shares of Company 2 (“the Company”) to be executed between Company 1 and Mr. B, who is representing all the shareholders of the Company (“the Vendor”).

Please note that the Agreement is not a standard Share Sale Agreement, which contemplates and documents the whole implementation of the transactions leading to the transfer, from pre-closing conditions to be fulfilled prior to transfer and post closing conditions to be fulfilled after transfer.

Our opinion is restricted to the terms and conditions set forth in the draft provided:

Clause Observations:
Particulars of the Vendor Please note though Mr. B represents all the shareholders, he is merely a constituted attorney ALL the shareholders MUST be made parties to the agreement (named) Mr. B can execute the agreement for and on their behalf if so provided in the Power of Attorney (POA). The POA should be annexed to the Agreement.Also please check whether the power of attorney has been executed properly and also check whether that power of attorney has been registered.
In the Particulars of the Vendor, M/S Company 2. has been defined as “the Co.” but this term has not been used throughout the agreement – sometimes the term “Co.” has been used, at other times “Company” has been used. As such we suggest you to define M/S Company 2. as “the Company” and use this term through the Agreement uniformly.Please change the word “Vendor” to “Vendors” and change the reference throughout the agreement.
3rd Recital In this recital in line 3 the word “DES” should be replaced with “DSE”.
Clause 6 and Clause 7 It is not clear if the Agreement is the Sale Deed. Either refer to the Agreement as “this Agreement” or define the agreement as a “Sale Deed” and use the reference throughout the Agreement.It is not the sale of property where the title deeds are handed over upon execution of a Deed of Sale.

It is a private company, each shareholder should offer the other to purchase his/her shares, failing which the shares will be sold to the Purchaser – this will required to be documented. The Board of the Company must approve of the transfer and the change of management.

The Purchaser should compile a list of documents to be handed over upon closing of the transaction and what other documents to be handed over post closing.

Clause 7 is not an exhaustive list, letter of renouncement, the minutes and resolution for transfer and change of manage, the original Memorandum and Articles of Association of the Company with the original Incorporation Certificate, the Share Certificate of the DSE, the share certificate book, Register of Members, Transfer Book and other corporate books, certification from the banker of the Company that no dues is owed and no charges have been made on the assets of the Company should be added on.
In the 1st line of clause 7, please replace the word “provided” with the word “provide”.
Clause 8 Will there be any security with regard to refund of money in case the authorities fail to approve of the transaction? Money can be kept in escrow until approvals are obtained which will trigger of the payment by the escrow agent (bank) to the Vendors.
Clause 9 Please delete Clause 9 and replace with the following:“9. That at the time of signing the Agreement the Vendor or any other person acceptable to the Company shall provide a personal guarantee (the “guarantor”) to the Company stating inter alia that in case there is any judgment, decree or any other legal claim or obligation against the Company or the Vendors, as owners of the Scheduled Shares, in connection with the transfer of the Scheduled Shares to the Purchaser, the Guarantor shall re-compensate the Company for any expenditures incurred by the Purchaser to preserve and protect its interest in the Company and the shares of the Company.”It doesn’t matter if the dispute is prior or after the purchase. Before the purchase, the Vendors have to ensure that they are transferring an unencumbered Company and shares to the Purchaser and that no one has any claim thereto.

Please note that there is no warranty clause in the Agreement stating that the Shares are unencumbered and that except for the dues disclosed to the Purchaser to other dues are owing by the Company.

Please incorporate the following:

“Representations and Warranties of the Vendors

The following are the warranties given by each of the Vendors to the Purchaser, such warranties being true and correct on the date hereof:

The Shares

(a)it has a good, valid and merchantable title to the Scheduled Shares, which it owns and such Scheduled Shares, are transferable to the Purchaser.

(b) The Scheduled Shares are beneficially owned by each relevant Vendor free of all liens, charges and encumbrances or interests in favour of or claims made by or which could be made by any other person.

(c)The paid up share capital of the Company is of Tk. 35,00,000.00 consisting of 35,000 fully paid-up shares of Taka 100.00 each.

The Vendors

(b) It is entitled to sell or procure the sale of the full legal and beneficial interest in the Scheduled Shares to the Purchaser on the terms set out in this Agreement.

(c)It has secured all necessary approvals and consents required for the performance of the transactions contemplated by this Agreement.

(d)The execution, delivery and performance of this Agreement and all other agreements, documents, instruments and certificates contemplated hereby and the consummation of the transaction have been duly and validly authorized by all necessary corporate actions on its part.

(e)The execution and delivery of this Agreement by it and the consummation of the transaction contemplated hereby and compliance with the terms hereof do not and will not be in breach of any agreement or instrument to which it is a party.

(f) This Agreement and the other agreements, documents and instruments to be delivered by it to the Purchaser will constitute its valid and legally binding obligation, enforceable against it in accordance with their respective terms.”
Clause 12 In line 4 of Clause 12 please replace the word “relive” with the word “relieve”
General Please fill up all the blanks in the Agreement with relevant information.

We are returning all documents; please acknowledge receipt of the same.

Thanking you.

Yours faithfully,

(_________________)

Barrister-at-Law

Drafted by:

The Lawyers & Jurists
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Bijoy Nagar, Dhaka-1000.
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