JOINT VENTURE AGREEMENT
This Agreement is made as of
this
, 2005 by and between:
1. Best
Mark Investments
Holdings Ltd., a
corporation duly organized and
existing under
the laws of the
British Virgin Islands with it's a
registered office at
Arias, Fabrega &
Fabrega Trust Co. BVI
Limited,
325 Waterfront Drive,
Omar Hodge Building,
2nd Floor, Wickham's
Cay,
Road Town, Tortola,
British Virgin Islands (hereinafter referred to as
"SIMS"), which is a
wholly owned
subsidiary of Sims
Trading
Company
Limited, a company
organized and existing
under the law of Hong
Kong
and having its
registered office at
10th Floor, DCH Building, 20 Kai
Cheung Road, Kowloon
Bay, Hong Kong (hereinafter referred to as "Sims
Trading"); and
2. SPAR
International
Ltd., a company
organized and existing
under the
laws of the Cayman Islands, having its a registered office in
Georgetown, Grand
Cayman with an office 580 White Plains Road,
Tarrytown, NY, USA (hereinafter called "SPAR"),
WITNESSETH THAT:
WHEREAS, SIMS is a wholly owned
subsidiary of Sims
Trading which is engaged in
the retail solution businesses in Hong Kong and China,
having a wide range
of
clients and also having
various knowledge and human resources with respect
to
the retailing businesses in
Hong Kong and China.
WHEREAS, SPAR is engaged in the retail
solution businesses in the USA,
having
computer software useful for agency,
assistance,
instruction and
reporting of
storefront activities and also having
operational know-how with respect to such
software; and
WHEREAS, SIMS and SPAR are desirous of
organizing a Hong Kong
corporation
to
acquire a company in China to
conduct a retail solution businesses in China and
will further consider
whether to extend the
retail solution
businesses to Hong
Kong (Hong Kong and China are
collectively referred to as "Territory").
NOW, THEREFORE, in consideration of the mutual
covenants and agreement herein
contained, the parties hereto
agree as follows:.
CHAPTHER I: ORGANIZATION OF THE NEW COMPANY
-------------------------------
Article 1.
Establishment
Promptly after the effective date of this
Agreement,
the parties hereto
shall
cause a new company to be organized under the laws of Hong Kong
(hereinafter
called "SPAR China"). SPAR China shall then
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form a wholly owned subsidiary in the rest of China and upon
formation,
The
wholly owned subsidiary and SPAR China shall become a
party to this
Agreement
(herein referred to as the
"New Companies").
Article 2. Business
Purposes
The business purposes of the
New Companies shall consist of the following:
1. Provide retail
merchandising and product demonstration services;
2. Agency, assistance,
instruction and report of storefront sales activities;
3. Implementation of market
research and analysis of results thereof;
4. Installation of displays
for new product launch, cut-ins and category resets;
5. Re-ordering and
replenishment; .
6. Assembly of setups used
for sales promotion;
7. POSM management/POP
monitoring;
8. Consulting regarding store
management;
9. Development and sale of
management system regarding retailing;
10. Designing and sale of
data; and
11. Any and all businesses
incidental or relating to any of the foregoing.
Article 3. Trade Name
The New Companies shall be named in the Territory as SPAR China Ltd. or as
mutually agreed between the parties.
However at a future
date and with written
notice the name of the
companies may be changed to reflect the equal shared
ownership of the New
Companies by Sims Trading using the name "Sims" or "DCH"
at
its discretion.
Article 4. Location
SPAR China shall have its
main office in Hong Kong.
Article 5.
Articles of Association
The Articles of Association
of SPAR China shall be attached as Exhibit A hereto.
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Article 6. Capital
The total number of shares
which SPAR China shall be authorized to issue shall
be 5,000,000 that par value of each
share shall be HK$1.00. At the time of
establishment of SPAR China shares shall be
issued and fully
subscribed by the
parties hereto as
follow:
o SIMS
50% HK$800,000.00
o SPAR:
50% HK$800,000.00
All the shares to be issued
by SPAR China shall be ordinary shares
Article 7. Payment
Each of the parties hereto
shall pay in Hong Kong dollars and in cash the amount
equivalent to its subscribed
shares at par value
upon issuance of the shares of
SPAR China.
CHAPTER II. PREPARATION OF ESTABLISHMENT OF THE NEW
COMPANIES
-------------------------------------------------
Article 8. Preparation of
Establishment of SPAR China
Each party shall take its
role as described
below for the
preparation
of the
commencement of SPAR China
business. Any expenses and costs necessary
for such
preparation shall be borne by
each party.
SPAR shall enter into with
SIMS on behalf of SPAR China Ltd. a license agreement
in the form attached hereto as Exhibit B (the "License Agreement"). For
reference, the License
Agreement includes the obligations of SPAR to:
1.
localize, set
up, maintain and
enhance software
provided by SPAR
to
work in China;
2.
localize, set up,
maintain and enhance
software provided by SPAR to
work in Hong Kong at the option of the New Companies;
3. consult on the organization
of merchandising services;
4.
train the New Companies' personnel in how to operate the
merchandising
software;
5. give
advice on budgeting and development of each business
plan;
6.
provide 24 hours/day/365days/year IT system support and problem
solving
services to
the New Companies with no consideration for time
differences;
7.
Promote the
New Companies' services to SPAR US customers with
operations in the Territory.
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Sims Trading
shall:
1.
provide office
space, facility and other back office and support
services to the New Companies under the terms described in Article 26
herein;
2.
arrange meetings
with current
clients to promote the
New
Companies'
services;
3.
transfer such business
as is practical to the New Companies currently
performed by Sims
Trading on behalf of Sims Trading's principals at
charges to be agreed
between the parties
hereto. [Need to
determine
pricing.]
CHAPTER III: GENERAL MEETING OF SHAREHOLDERS
-------------------------------
Article 9. Annual General Meeting
and Extraordinary General Meeting
The Annual General Meeting of Shareholders shall be held in Hong Kong or
any
other vicinal place within 3 months from
the day of each
accounting period
of
SPAR China.
An Extraordinary General Meeting shall be convened
whenever deemed necessary by
the parties
hereto.
Article 10. Quorum
A quorum of the General
Meeting of
Shareholders
shall be the
parties hereto
present either in person or
by proxy.
Article 11. Resolution
Except as expressly
otherwise provided in the Articles of
Association of
SPAR
China Ltd. and this Agreement, all resolutions of the General Meeting of
shareholders shall be adopted
by the affirmative vote of shareholders holding at
least 52% of the shares
present or
represented
at meeting
for which there
is
quorum or by written
resolutions of all shareholders.
Article 12. Important Matters
In addition to such matters
as required by the Articles of Association of SPAR
China and the Companies Ordinance (Chapter 32, Laws of Hong Kong), any
resolutions of the following matters by the General
Meeting of
shareholders
require the affirmative vote of at lease three quarters of the votes of
the
shareholders
present:
1. any
amendment or modification of the Articles of
Association;
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2.
increase or decrease in the authorized capital or paid-up
capital;
3.
issuance of new
shares or any
other kind of equity securities or
instruments
convertible into
equity securities or the decision to
undertake a Public Offering (as defined in Article 30);
4.
issuance of debentures;
5.
transfer of any part or whole of business
6. any
and all matters relating to dividends of SPAR China;
7.
dissolution or amalgamation;
8.
change in number or length of tenure of Directors;
CHAPTER IV: BOARD OF DIRECTORS AND OFFICERS
-------------------------------
Article 13. Election of
Directors
The Board of Directors of the SPAR China shall
consist of four (4)
Directors;
two (2) of whom shall be
elected from among
those appointed by SIMS and 2 of
whom shall be elected from
those appointed by SPAR. The Chairman of the Board of
Directors shall be elected
from the Directors by the mutual consultation of both
parties. In case of any increase or decrease in the number
of Directors,
the
representation stipulated
above shall be unchanged and pro-rata at all times.
Article 14. Election of
Officers
Officers shall be appointed by the Board of directors and serve at their
pleasure.
Article 15. Office of
Director
The term of office of each
Director shall expire at the close of each
Annual
General Meeting of Shareholders, which relates to the closing of the annual
accounts, but each of the
Directors are eligible for re-election.
Article 16. Quorum
Each Director shall have one (1) voting right in
the Board of
Directors.
The
quorum at meetings of the
Directors shall be two (2) Directors, provided that at
least one of the Directors appointed by SPAR
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and at least one of the
Directors appointed by
SIMS. All resolutions
shall be
adopted by the affirmative vote of more than two-thirds of the votes of the
Directors that are in
attendance or by proxy.
Article 17. Meetings of the Board of
Directors
The Ordinary Meetings of the Board of Directors
shall be held
quarterly and an
Extraordinary Meeting of the Board of Directors
shall be held when
necessary,
and shall be convened
in accordance with the provisions of the Articles of
Association and this
Agreement To the extent then permitted, any meeting of the
Board of Directors may be
held by interactive
video conference or other similar
electronic or telephonic
means, and any action that may be taken by the Board of
Directors at a meeting
thereof (whether in person or video
conference) may
be
effected in lieu of such meeting by unanimous written consent resolution
executed by each member of
the Board of Directors. The parties hereto confirm
that the prevailing interpretation in Territory is that meetings of
boards of
directors may be held by interactive videoconference. A written record in
English of all meetings of
the Board of Directors and all Board decisions shall
be made available as promptly
as practicable after
each meeting of the Board of
Directors. At each meeting, one Director shall be selected by the
attending
Directors to act as the Secretary of the meeting and keep the records of
the
meeting. The records of the meeting shall
be confirmed by the signature of each
of the Directors.
Article 18. Important Matters
In addition to such matters
as required by the Articles of Association of SPAR
China, the following matters
of the Board of Directors meeting shall require the
unanimous vote of all
Directors:
1. Any
proposal to the
shareholders
or action by the Board
of Directors
for the matters as provided in Article 12 hereof;
2. any
investment or commitment of SPAR China in amounts individually in
excess of HK $200,000.00 or in the aggregate in excess of
HK$400,000.00;
3. any
loan or credit taken by SPAR China;
4.
execution, amendment
or termination of agreements or commitments with
SIMS, SPAR or their subsidiaries or affiliates;
5.
adoption or amendment of the annual budgets and business
plan;
6.
adoption or
any material modification of major regulations or
procedures, including any employee rules or handbook;
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7.
change of the auditing firm as provided in Article 21;
8.
initiating or settling
any litigation, arbitration or other formal
dispute settlement
procedures or forgiveness of any obligation owed to
SPAR China in excess of HK$200,000.00;
9.
approval of annual
closing of the books of SPAR China and SPAR China's
annual financial
statements, and
changing of accounting
policies and
practices or SPAR China's accounting periods;
10. No sale at
disposition
of or granting a lien, security interest or
similar obligation
with respect to, in one or a series
of related
transactions of SPAR China or with respect to any major strategic
asset
of SPAR China that is crucial to SPAR China's business;
11. Formation
of any subsidiary of
SPAR China, entry into
(or
subsequent
termination of) any joint venture, partnership or similar
agreements;
12. Entering
into amending or terminating agreement or commitment to
provide goods or services outside the Territory.
13.
Appointment or dismissal of the President or Chief Executive
Officer.
CHAPTER V: AUDIT
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Article 19. Accounting Period
The accounting periods of SPAR China shall end on the 31st day of
December of
each year.
Article 20. Statutory
Auditors
A Statutory Auditor shall be
appointed by SPAR China where required by law.
Article 21. Inspection of Accounting
Records and Books
The accounting records and books of SPAR China
shall be audited annually. SPAR
China shall submit a report
of such audit to each of the parties hereto within
thirty (30) days from the
completion of the audit.
Ernst & Young or KPMG or
another mutually accepted international auditing firm
shall be the auditing firm
engaged by SPAR China. This auditing firm shall audit
the accounting records and books of the New
Companies and any other matters
relating, directly or indirectly, to the
financial conditions of New Companies.
Any fee for the certified
public accountant for inspection and
audit mentioned
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above shall be borne by New Companies. SPAR China shall keep true and
correct
accounting records and books with regard to
all of its operations in accordance
with generally accepted
accounting principals
consistently applied
("GAAP") in
Territory. All accounting records and books shall be kept
ready for inspection
by the parties hereto or by their authorized representative. If requested by
SPAR, SPAR China shall cooperate with respect to each financial period to
provide such information as
required by SPAR to reconcile SPAR China's financial
statements with U.S. GAAP
reporting requirements of SPAR.
Article 22. Increase of
Capital
In case of capital increase
of SPAR China after its establishment, SIMS and SPAR
shall have the preemptive right to new shares to be issued for such capital
increase in proportion to
their respective shareholdings in SPAR China.
CHAPTER VI: TRANSFER OF SHARES
------------------
Article 23. Restrictions on Transfer of
Shares
Except as provided in Article
24 hereof, neither party hereto shall, without the
prior written consent of the other party, assign, sell, transfer, pledge,
mortgage, or otherwise dispose of all or any part of its
shares (including its
right to subscribe to new
shares) of SPAR China to any third parties.
Article 24. Preemptive Right and
Option
1. After five
