1. SCM hereby agrees to provide finance to the Company
by subscribing to the redeemable Capital of the Company
to the extent of Rs. ______ (Rupees __________ only) (hereinafter
referred to as "SCM's Investment") for the purchase
of moveable assets required for the Project, on terms
and conditions contained herein.
2. the Company shall use SCM's Investment only for working
capital requirements of the Project as specified in clause
I above and shall not divert or use it for any other purpose.
3. the Company shall, as and when required by SCM issue
Musharika Certificates in favour of SCM and to the extent
of the value of the SCM's Investment, in form and substance
and denominations as SCM may from time to time require.
4. The investment of certificate holders in the Company
for the purpose of this Agreement is Rs. ___________ (Rupees
_______________ only) (hereinafter referred to as the
Company’s Investment") the Company hereby undertakes
not to change the present certificate holding, accumulated
reserves of unappropriated past profits and or management
of the Company without the prior written consent of SCM
during the subsistance of this Agreement.
5. the Company shall not without the prior written consent
of SCM make any borrowings or raise any funds either on
short term or on long-term basis from any source whatsoever.
6. the Company hereby covenants that on the basis of
the past experience and data available with the Company
it is expected that after adding SCM’s Investment
in the Project the total pre-tax profit from the total
investment of the Company and SCM shall be ___% per annum.
The aforesaid rate of profit is hereinafter referred to
as the "projected rate of profit" of the Company.
7. On the basis of projected rate of profit as per clause
6 above, the profit on SCM's Investment is expected to
be not less than ____% per annum (hereinafter referred
to as the "Provisional profit")
8. the Company hereby agrees to open, subject to prior
written consent of SCM, with a bank an account to be termed
"Musharika account" and keep the same in credit
and irrevocably authorises SCM to debit to it at the end
of each calendar quarter the provisional profit as above
calculated on the basis of daily product of SCM's outstanding
Investment.
9. the Company shall perform all deeds and acts and fulfill
legal requirements that may at any time and from time
to time be necessary to implement this Agreement.
10. the Company shall furnish to SCM within one month
of the end of each quarter of its accounting year a report
on the performance of the Company and the profits earned
during that quarter in such form as may be required by
SCM from time to time.
11. the Company shall execute documents and furnish all
information which SCM may at any time require from the
Company.
12. For the purpose of this agreement annual accounts
of the Company shall be prepared by the Company after
allowing for depreciation and expenses to such extent
as SCM may in its discretion to be exercised in consonance
with generally accepted principles, determine.
13. At the close of each accounting year the profits
for that year determined in accordance with the accounts
prepared under clause 12 hereof, shall be appropriated
pro-rata towards the Investment of SCM and of the sponsors
of the Company mentioned in this Agreement.
14. On appropriations being made under clause 13 above
if any amount is found to be due to SCM in excess of the
provisional profit debited by SCM to Musharika account
under clause 8 hereof such excess shall be credited to
a special reserve (hereinafter called "Participation
Reserve") to be created by the Company in its books
of account.
15. If the amount debited by SCM to the Musharika account
as aforesaid is found to be in excess of the share of
profit determined to be due on appropriations as aforesaid
such excess shall be debited to the "Participation
Reserve".
16. Upon termination of this agreement under clause 19
hereof a final account of profits due to or loss due from
SCM shall be made up and settled between SCM and the Company
provided that if upon final account being made up any
credit balance is found in the participation reserve,
the sum so available in participation reserve shall be
divided between SCM and the Company in the ratio of 0
: 100.
17. the Company shall provide to SCM within three months
of the close of its accounting year a copy of its accounts
prepared under clause 16 and also a copy of its audited
balance sheet if different.
18. In the event that losses exceed profits over any
accounting year of the Musharika and accumulation in the
participation reserve fund is insufficient for full adjustment
thereof, then the Company may claim by serving a notice
within four months of the closing of the accounting year
from SCM refund of either the whole or part of the provisional
profit debited by SCM to the Musharika Account so as to
reimburse itself of the amount of net loss and SCM shall
refund the amount so demanded within one month. It is
hereby expressly agreed that in the event of the Company
not serving on SCM the required notice within four months
of the close of the accounting year it shall be deemed
to have waived its right to claim any refund and admit
that its minimum profit was such to entitle the SCM to
a share equivalent to the amount debited to the Musharika
account under clause 8 aforesaid.
19. This Agreement is initially for a period of thirteen
months but the Company may request the SCM to extend the
duration of the project upon mutually agreed terms. Provided
that SCM if at any time hereafter is of the opinion that
the Modaraba is conducting unauthorised business or is
in breach of any covenant hereof or law, usage or business
practice thereby the interest of the SCM is likely to
be jeopardized may without assigning any reason by notice
to the Company terminate this agreement in which event
the redeemable capital shall forthwith be redeemed by
the Company together with SCM's share of profit at the
provisional rate under clause 7 hereof. In the event of
the Company’s failure to repay the same as aforesaid
either in whole or in part the Modaraba will be liable
to pay to SCM additionally a sum equal to twenty percent
of the amount remaining unpaid as and by way of liquidated
damages.
20. In the event of SCM's share of profit in any two
of the preceding three years being less than the provisional
rate of profit SCM shall have the right to convert not
more than twenty percent of its investment into ordinary
certificates of the Company at a break-up value of the
certificates of the Company determined in accordance with
the rules prescribed under the Companies Ordinance, 1984.
21. the Company shall issue the letters of allotment
of certificates as mentioned hereinabove within thirty
days of demand by SCM and these certificates shall be
of the class of ordinary certificates of the Company and
SCM shall have equal rights as enjoyed by other ordinary
certificate holders including rights of voting, transferring,
subscription for right issue/bonus issue, dividends etc.,
under the law governing Joint Stock Companies and Modarabas.
22. In case the Company suffers losses during the period
of Investment on account of mismanagement or otherwise
and/or fails to repay SCM's Investment and/or profit/compensation
for any reason whatsoever, or fails to perform any of
the covenants hereunder SCM may, besides other remedies
available, proceed for liquidation of the Company in order
to realise its dues.
23. In case of the failure of the Company to achieve
reasonable profits or incurring loss due to mismanagement,
negligence or fraud, breach of any terms and conditions
contained herein or any law, rule or trade practice, SCM
shall be entitled to claim liquidated damages by making
reference to arbitration in accordance with arbitration
clause contained herein in clause 26.
