Question 1 -Identify three key risks faced by GPS as a result of the changes made by Pavis Dolk to the drag along the rights clause. Provide an explanation for each risk you identify. -Recommend three changes you would make to the revised clause to protect GPS's interests. provide a justification for each suggested change When crafting your response , pay close attention to the facts of the case, including loanspys reliance on existing managers and freshmeadows willingness to aggressively protect GPS
into the initial draft, while strikethrough text removed. X1 Drag Along Rights X1.1 If the [GPS] (the "Sponsor") elects to transfer all of its shares in LoanSpy ("the Sponsor Shares") to a bona fide and reputable purchaser on arm's length terms (the "Buyer"), the Sponsor may require all other shareholders in [LoanSpy] (the "Dragged Shareholders"} to sell and transfer all their shares (the "Dragged Shares") to the Buyer (or as the Buyer directs) in accordance with the provisions of this clause/article ("Drag Along Right"); provided, however, that this Drag Along Clause will not be exercisable for a period of five years from the date of the adoption of these Articles of Association. : x1 2 The Sponsor may exercise the Drag Along Right by giving written notice that the Drag Along Right is to be exercised to the Dragged Shareholders (a "Drag Along Notice") at any time prior to the transfer of the Sponsor's Shares to the Buyer. The Drag Along Notice shall inform the Dragged Shareholders: AL. That they are required pursuant to this article (x] to transfer all of the Dragged Shares; Of the person to whom the Dragged Shares are to be transferred; Of the purchase price payable for the Dragged Shares which shall, for each Dragged Share, be an amount which is fet leastthe higher of either (1) equal to-the price per share offered by the Buyer for the Sellers" Shares, or (ii) an amount equal to the value of LoanSpy as determined by a reputable and independent financial advisor appointed by the Dragged Shareholders, divided by the proportion of LoanSpy's issued shares held by the Dragged Shareholders; A iv. The proposed date of the transfer of the Dragged Shares, which shall not be earlier than three calendar months after the date the Drag Along Notice is received by the Dragged Shareholders. x1.3 [Once a Drag Along Notice is given to the Dragged Shareholders it shall be irrevocable]. A Drag Along Notice shall lapse if, for any reason, the Sponsor has not sold the Sponsor Shares to the Buyer (or the person the buyer directs) within [number] of Business Days of serving the Drag Along Notice. The Spor serve further Drag Along Notices following the frevocation or] lapse of any Brag Along Notice." X1.4 The Dragged She yes to the Buyer of the company's shares." No Drag Along Notice shall require a Dragged Shareholder to agree to any terms relating to the sale of the Dragged Shares except those specifically set out in this (x). Figure 1: The first page of GPS's drag along rights in the new articles of association for LoanSpy. Figure 2, similarly, shows the second and final page of the marked-up version of the drag along rights by Paxis Dolk getsmarter.com | info@getsmarter.com 44 203 457 5774 (UK) | +1 224 249 3522 (US) | +27 21 447 7565 (SA) IN COLLABORATION WITH getsmarter~ Page 4 of 7 LSE THE LONDON SCHOOL OF ECONOMICS AND Ise.ac.uk POLITICAL SCIENCE X1.5 The sale and transfer of the Dragged Shares shall take place on the Completion Date. Completion Date means the date proposed for completion of the sale of the Dragged Shares included in the Drag Along Notice, which shall not be earlier than three calendar months after the receipt of the Drag Along Notice. X1.6 On or before the Completion Date, the Dragged Shareholders shall execute and deliver stock transfer forms for the Dragged Shares, together with the relevant share certificates to the Company. On the Completion Date, the Company shall pay the Dragged Shareholders, on behalf of the Buyer, the amounts due pursuant to 1.2(c) to the extent that the Buyer has put the Company in the requisite funds. X1.7 To the extent that the Buyer has not on the Completion Date put the Company in funds to pay the purchase price due in respect of the Dragged Shares, the Dragged Shareholders shall be entitled to the immediate return of the stock transfer forms and share certificates for the relevant Dragged Shares and the Dragged Shareholders shall have no further rights or obligations under this 1 in respect of the Drag Along Notice to which such stock transfer forms and share certificates relate. X1.B If any Dragged Shareholder does not, on or before the Completion Date, execute-and deliver (in accordance with-1.6) stock-transfer-forms in respect of all of the Dragged Shares held by it, each-defaulting Dragged-Shareholder shall be deemed to have Irrevocably appointed the Sponsor to be its agent to execute all-necessary transfer(s) on its-behalf, against receipt by the Company (on-trust-for such-holder) of the purchase price payable for the Dragged Shares, and to deliver such-transfer(s) to the Buyer for as it may direct) as the holder-thereof, After-the Buyer for its nominee) has been registered as the holder of the Dragged shares, the validity of such-proceedings shall-not be questioned by any person. Figure 2: The second page of GPS's drag along rights in the new articles of association for LoanSpy Note: If you are unable to clearly read the strikethrough text in Figure 1, access the
