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JOINT VENTURE AGREEMENT

Joint Venture JV Agreement

JOINT VENTURE AGREEMENT | Document Parties: SPAR GROUP INC | Solutions Integrated Marketing Services Ltd | SPAR Group  International,  Inc. You are currently viewing:
This Joint Venture JV Agreement involves

SPAR GROUP INC | Solutions Integrated Marketing Services Ltd | SPAR Group International, Inc.

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Title: JOINT VENTURE AGREEMENT
Governing Law: Nevada     Date: 4/12/2005
Industry: Business Services     Sector: Services

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                             JOINT VENTURE AGREEMENT

 

This Joint Venture Agreement is made as of this 26th day of March 2004

 

By and Between

 

Solutions Integrated Marketing Services Ltd, a company incorporated and existing

under the [Indian]   Companies Act, 1956, and having its registered office at 3rd

Floor,   Chandra Bhawan 67-68, Nehru Place, New Delhi, India, 110019 (hereinafter

called "SOLUTIONS"),

 

And

 

SPAR Group   International,   Inc. a company organized and existing under the laws

of the State of Nevada,   having its   principal   place of   business   at 580 White

Plains Road, Tarrytown, NY, USA (hereinafter called "SPAR"),

 

                                WITNESSETH THAT:

 

WHEREAS:

 

1.        SOLUTIONS is an integrated   marketing-services company offering a broad

         range of   marketing.   & sales   support   services   to a large   number of

         clients, in India, South Asia, ASEAN & other markets.   Retail solutions

         & merchandising   services are part of this broad portfolio of services,

          and SOLUTIONS   knowledge as well as human resources with respect to the

         retailing businesses in India;

 

2.        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;

 

3.        In pursuance of the Statement of Understanding recorded on December 22,

         2003,   the Parties now intend to establish   and develop a joint venture

         company   in   India to   undertake   the   business   of   conducting   retail

         solutions businesses in the Territory (hereinafter defined); and

 

4.        The Parties are desirous of recording   inter alia their   intention   and

         agreement as regards the   establishment   of the proposed   joint venture

         company under the name and style "SPAR Solutions India Private Limited"

         ("Company"),    it's    management    and   capital    structure,    and   the

         responsibilities   to be undertaken by each party in connection with the

         formation and operation of the said Company.

 

NOW,   THEREFORE,   in   consideration of the mutual covenants and agreement herein

contained, the parties hereto agree as follows:

 

I.        In this Agreement each of the following   expressions,   unless repugnant

         to the context, shall have the meaning hereinbelow assigned:

<PAGE>

 

 

         "Act" shall mean the   [Indian]   Companies   Act,   1956 and the rules and

         regulations   made   thereunder   and   shall   include   any   re-enactment's

         thereof,   amendments and or modifications thereto for the time being in

         force.

 

         "Affiliate"   means,   with respect to either Party or any third   Person,

         any other Person   which,   directly or   indirectly,   through one or more

         intermediaries,   controls, is controlled by, or is under common control

         with,   such   Party.   The term   "control"   means   the   power to vote ten

         percent (10%) or more of the securities or other equity   interests of a

         Person having ordinary   voting power,   or the   possession,   directly or

         indirectly,   of any other power to direct or cause the direction of the

          management   and   policies of a Person,   whether   through   ownership   of

         voting securities, by contract or otherwise.

 

         "Agreed   Form" shall mean in the   context of any   document a version of

         such document as mutually agreed to and initialed by both Parties.

 

         "Agreement" or "this Agreement" shall mean this Joint Venture Agreement

         as amended,   modified or   supplemented by the Parties hereto in writing

         from time to time.

 

         "Approval(s)"   shall mean all   authorisations,   approvals,   clearances,

         permissions,   consents,   validations,    confirmations,    licenses,   and

         exemptions   of,   registrations   and   filings   with and   reports   to any

         central,   state, municipal or local authority, or political subdivision

         thereof,   and   any   government   or   any   person   exercising   executive,

         legislative, regulatory or administrative functions of or pertaining to

         government,   and any   corporation   or other entity owned or controlled,

         through   stock   or   capital   ownership   or   otherwise,   by   any   of the

         foregoing ,required to be obtained in order to implement the provisions

         of this Agreement.

 

         "Board" or "Board of   Directors"   shall mean the board of   directors of

         the Company, as reconstituted from time to time.

 

         "Business" shall have the meaning assigned to it in Article 2 below.

 

         "Company"   means an Indian company to be   incorporated   by the Parties,

         for the purpose of   implementation of the joint venture project of SPAR

         and ,SOLUTIONS,   under the name and style "SPAR Solutions India Private

         Limited"   or such other name as may be   approved   by the   Registrar   of

         Companies, Delhi & Haryana.

 

         "Closing Date" shall have the meaning set forth in Article 5.3 below.

 

         "Deed of   Adherence"   means the deed or   instrument   to be entered into

         between a transferor Shareholder and a transferee of Shares whereby the

         transferee   agrees   to   adhere   to and be   bound   by the   terms of this

         Agreement.

 

         "Effective Date" shall have the meaning assigned to it in Article 31 of

         this Agreement.

 

         "Governmental    Body"    shall   mean   any   court   or    tribunal   in   any

         jurisdiction   or any public,   governmental,   legislative   or regulatory

         body, agency, department,   commission, board, bureau or other authority

         or instrumentality.

 

                                        2

<PAGE>

 

         "Party" and "Parties" shall mean SOLUTIONS and SPAR,   individually   and

         collectively as the context may require.

 

         "Person" means an individual,   corporation,   limited liability company,

         partnership,   association,   trust, business trust, joint venture, joint

         stock company,   pool,   syndicate,   sole proprietorship,   unincorporated

         organization,   Governmental   Body or   other   form of   entity   or   group

         thereof.

 

          "Security   Interests"   means and includes any interest or equity of any

         person,   authority   or   body   (including,    without   prejudice   to   the

         generality of the foregoing,   any right to acquire,   option or right of

         pre-emption,   or   requirement   for   consent) or any   mortgage,   charge,

         pledge,   lien,   or   assignment   or any other   encumbrance,   priority or

         security   interest over or in the relevant   property or   arrangement of

         whatsoever   nature which restrict or affect   negatively   the value,   or

         impedes or restricts the right to enjoy such property.

 

         "Share"   means an equity   share of the   Company of face value of Rupees

         10/- each issued by the Company from time to time.

 

         "Shareholder" means a holder of Shares of the Company and registered in

         the Register of Members of the Company.

 

         "Territory"   shall mean the   geographical   territory   and extent of the

         Republic of India.

 

         "Transfer"   means the disposal of any interest in the Shares   including

         by way of   sale or   assignment   or the   grant   or the   creation   of any

         Security   Interest   over,   including any option or right of pre-emption

         over the Shares or the   mortgage   of,   creation   of charge   over or the

         subjecting of the Shares to an encumbrance.

 

II.       Unless otherwise stated or unless the context   otherwise   requires,   in

         this Agreement:

 

         (a)       Headings   are for   convenience   only and shall not   affect its

                  interpretation.

 

         (b)       References   to   the   Agreement    shall   mean   and   include   an

                  appropriate   reference to the schedules,   exhibits and annexes

                  hereto.

 

         (c)       References   to statutes   shall be a reference to the statutory

                  enactment's,   rules and regulations   (as modified,   amended or

                  re-enacted as of the appropriate date) in force.

 

                        CHAPTER 1: FORMATION OF THE COMPANY

 

Article 1.         Establishment of the Company

 

(a)       Promptly after the Effective Date of this Agreement, SOLUTIONS shall be

         responsible   for   incorporation   of the   Company   as a private   limited

          company in the State of Delhi under the provisions of the Act.

 

                                       3

<PAGE>

 

         (i)       For   the   purposes   of   incorporation   of   the   said   Company,

                  SOLUTIONS    shall    nominate   two   resident    Indians   as   the

                  subscribers   to the   Memorandum and Articles of Association of

                  the Company and shall   subscribe to a minimum of 10,000 equity

                  Shares in order to comply with the minimum   paid up capital of

                  Rs. 1,00,000/(Rupees One Lakh Only) prescribed under the Act.

 

         (ii)      The nominees of SOLUTIONS   shall be the first Directors of the

                  Company.

 

         (iii)     The Company   will be   incorporated   with an   authorised   share

                  capital of Rs.   50,00,000/-   (Rupees Fifty Lakhs Only) divided

                  into   5,00,000   Shares   (Five   Lakhs Only) of par value of Rs.

                  10/-   (Rupees   Ten   Only)   each.   Upon   incorporation   of   the

                  Company,   the Parties   shall cause the Company to enter into a

                  deed or   instrument in the nature of a deed of adherence to be

                  executed   by the Company in Agreed   Form   (attached   hereto as

                  Exhibit A) to evidence its agreement to adhere to and be bound

                  by   the   terms   hereof.   It is   agreed   that   the   process   of

                  incorporation   of the Company shall be initiated no later than

                   15 days   from the   Effective   Date   and   SOLUTIONS   shall   use

                  reasonable   endeavours to complete the   incorporation   process

                  within 60 days of the   Effective   Date. It is agreed that SPAR

                  will provide and render all   assistance   as may be required by

                  SOLUTIONS   for   the   purposes   of   incorporation   of the   said

                  Company.

 

(b)       The   Company   shall be   incorporated   under   the name and   style   "SPAR

         Solutions India Private Limited" (or such other name as may be approved

         by the Registrar of   Companies,   Delhi & Haryana) and shall conduct its

         Business operations under such name. However, it is clarified that such

         name is   suggestive   and that in the event,   for any reason the Company

         cannot be   incorporated   with such a name,   this shall not   entitle any

         Party hereto to resile from its obligations under this Agreement and in

         such an event the Parties   shall   endeavour   to agree upon another name

         for the Company.

 

(c)       The main   objects   included in the   Memorandum   of   Association   of the

         Company will be such that the Company shall be entitled to carry on the

         Business.   The   Parties   shall at all   times   mutually   agree   upon any

         modifications or amendments to the Memorandum of Association and/or the

         Articles   of   Association   of the   Company   which are   contrary to or a

         change in the terms of this Agreement.   In case of any conflict between

         this   Agreement   and the   Memorandum   of   Association   and   Articles of

         Association   of the Company,   the   provisions of this   Agreement   shall

         prevail as between SOLUTIONS and SPAR.

 

         Upon incorporation of the Company, and upon fulfillment of the terms of

         Article   5.2   hereof,   a Board   Meeting   of the   Company   shall be held

         whereat in particular the Board of Directors shall:

 

         (i)       approve the   allotment   of Shares to SPAR such that SPAR holds

                  51% of the entire Share capital of the Company;

 

         (ii)      approve   the   transfer of Shares   held by the   subscribers   to

                  SOLUTIONS   and also   approve the   allotment   of such number of

                  Shares as would be   necessary to ensure that   SOLUTIONS   holds

                  49% of the entire Share capital of the Company;

 

                                       4

<PAGE>

 

 

         (iii)     appoint the   nominees of SPAR on the Board of Directors of the

                  Company;

 

         (iv)      take on   record   the terms of this   Agreement   and the deed of

                  adherence   to be   executed   by the   Company in the Agreed Form

                  attached to this Agreement to evidence the Company's agreement

                  to adhere to and be bound by the terms of this   Agreement   and

                  authorise a representative   of the Company to execute the said

                  deed of adherence; and

 

         (v)       shall   take   necessary   steps   to   call   for an   extraordinary

                  general meeting of the Shareholders to adopt the memorandum of

                  association and articles of association of the Company amended

                   to   reflect    the    provisions    of   this    Agreement    (being

                  substantially in the form attached hereto as Exhibit A).

 

All expenses for the setting up and incorporation of the Company will be paid by

the   Company.    Upon    incorporation    the   said   Company   shall   reimburse   all

incorporation   expenses to SOLUTIONS.   If this Agreement is not consummated each

Party shall pay its own costs.

 

Article 2.         Business Purpose

 

The Business of the Company shall consist of the following:

 

1.        Provide   retail   i.e.   instore   merchandising   services   in relation to

         setting up and merchandising of retail stores;

 

2.        Agency,   assistance,   instruction   and   report   of   instore   or   retail

         merchandising activities;

 

3.        Implementation   of market   research and   analysis (of results   thereof)

         pertaining   to retail   merchandising;  

 

4.        Assembly   of setups used for retail merchandising;

 

5.        Consulting regarding store management;

 

6.         Development    and    sale   of    management    system    regarding    retail

         merchandising;

 

7.        Designing and sale of database pertaining to retail merchandising; and

 

Article 3.         Memorandum of Association and Articles of Association

 

Upon   incorporation   of the Company and upon fulfillment of the terms of Article

5.2 hereof,   the Parties hereby undertake to take all necessary   actions to give

effect to the Agreed Form of the Memorandum of   Association   and the Articles of

Association   of the Company   amended to reflect the provisions of this Agreement

(attached hereto as Exhibit B).

 

Article 4.         Conditions to Subscription.

 

4.1.      Conditions Precedent: Each of the following is a condition precedent to

         the   obligation   of each of SPAR and   SOLUTIONS   to   subscribe   for the

         Shares of the Company as described in Article 5.1

 

                                       5

<PAGE>

 

         (a)       the   execution   of a License   Agreement   between   SPAR and the

                   Company in the   Agreed   Form   attached   hereto as Exhibit C in

                  terms   whereof   SPAR shall be obliged to   localize   and set up

                  software   provided   by SPAR to work in India,   consult   on the

                  organisation of   merchandising   services,   train the Company's

                  personnel   in how to operate the   merchandising   software   and

                  give advice on budgeting and development of each business plan

                  (the "License Agreement");

 

         (b)       the execution of a User   Agreement   between   SOLUTIONS and the

                  Company in the Agreed   Form   attached   hereto as Exhibit D for

                  the provision of office space,   facilities and services to the

                   Company ("User Agreement");

 

         (c)       to the extent   required,   receipt of all regulatory   Approvals

                  whether   from the   Government   of India   through   the   Foreign

                  Investment    Promotion    Board/    Secretariat   for   Industrial

                  Assistance    or   the   Reserve   Bank   of   India   or   any   other

                  Governmental   Body, as may be required for the consummation of

                  the transactions contemplated hereunder;

 

          (d)       Passing   of a   resolution   by the   Board of   Directors   of the

                  Company   for issue of the Shares in the manner as   detailed in

                  Article 5 hereunder.

 

         Each   Party   agrees   to   notify   the other   Party   that the   conditions

         precedent set forth in this   aforesaid   Article have been   satisfied or

         waived in accordance with the provisions of this Agreement.

 

4.2.      Failure to Satisfy Conditions.   In the event that all of the conditions

          precedent   set forth in Article 4.1 are not satisfied or waived (to the

         extent waivable) to the mutual satisfaction of SOLUTIONS and SPAR on or

         before May 30,   2004,   either   Party shall have the right to   terminate

         this Agreement by giving   written   notice to the other Party.   Upon any

         such   termination,   this   Agreement   shall   be of no   further   force or

         effect, and neither Party shall have any further obligations hereunder,

         except that Article 30 and 36 and the Parties'   respective   obligations

         thereunder, shall survive any such termination.

 

Article 5.         Subscription and Issuance

 

5.1.      The initial issued,   subscribed and paid up equity Share capital of the

         Company shall be Indian Rupees Rs 36,76,000,   which shall be subscribed

         to and held as follows:

 

<TABLE>

<CAPTION>

                   Party                  Percentage                   Number                 Equity capital

                                           Ownership                 of Shares                 (in Rupees)

<S>                                         <C>                     <C>                       <C>      

           SPAR                                  51%                     187476                  Rs 18,74,760

           SOLUTIONS                             49%                     180124                 Rs 18,01,240

           TOTAL                                100%                     367600                      3676000

</TABLE>

 

5.2.      For the purposes. of this Agreement and in order to enable the issuance

         of the number of fully paid   Shares   referred   to in Article 5.1 by the

         Company to SPAR and   SOLUTIONS,   promptly   after all of the   conditions

         precedent   set forth in   Article   4.1 are   satisfied   or waived (to the

         extent waivable) to the mutual   satisfaction of SOLUTIONS and SPAR, and

         not more than thirty (30) days thereafter:

 

                                       6

<PAGE>

 

         (a)       SPAR shall be obliged to pay into the account of the   Company,

                  as payment   towards Share   subscription   a sum of Rs 18,74,760

                  (Indian   Rupees   Eighteen   Lakhs Seventy Four   Thousand   Seven

                  Hundred and Sixty Only) ("SPAR Subscription Amount"); and

 

         (b)       SOLUTIONS   shall be   obliged   to pay into the   account   of the

                  Company   as payment   towards   Share   subscription   a sum of Rs

                  18,01,240   (Indian   Rupees   Eighteen   Lakhs One   Thousand   Two

                  Hundred and Forty Only) ("Solutions Subscription Amount").

 

         In   the   event   one   of the   Parties   does   not   pay   their   respective

         subscription   amount,   within   twenty   four   hours of the expiry of the

         aforesaid   thirty (30) days and the other Party has paid its respective

         subscription   amount,   the Company shall within a reasonable   period of

         time and subject to receipt of requisite   Approvals if any,   return the

         respective   subscription   amount   received from such Party who has made

         the payment and this Agreement shall stand terminated.   In the event of

         such   termination of this Agreement,   SOLUTIONS   and/or SPAR shall take

         all such steps as may be necessary to wind up the Company in accordance

         with the   provisions of the Act or   alternately   take all such steps as

         may be necessary to change tl1e name of the Company in accordance   with

         the Act,   such that the name of the Company does not include   reference

         to SPAR or SOLUTIONS as the case may be.

 

5.3.      The   Parties   agree   that   within   twenty   four hours of receipt by the

         Company   of   both   the   SPAR   Subscription   Amount   and   the   Solutions

         Subscription   Amount, the Company shall   simultaneously issue and allot

         to SPAR and SOLUTIONS the number of Shares   referred to in Article 5.1.

         The date on which such   allotment   occurs shall be the "Closing   Date".

         Upon such issue and allotment of the Shares of the Company,   SPAR shall

         hold Shares representing 51% of the paid up equity Share capital of the

         Company   and   SOLUTIONS   shall   hold   49% of the paid up   equity   Share

         capital of the Company. In addition,   the Parties shall ensure that the

         Company   makes   all such   filings   and   satisfies   all   such   reporting

         requirements   as may be   necessary   in   terms of the   Foreign   Exchange

         Management Act, 1999 and the   Regulations   issued   thereunder,   and the

         Act, in a timely manner;

 

         On the   Closing   Date,   the issued   and   paid-up   Share   capital of the

         Company   shall   be Rs   36,76,000/-   (Indian   Rupee   equivalent   of   USD

          75,000)/- divided into 367600 Shares of face value of Rupees 10 each.

 

Article 6A         Representations and Warranties and Indemnification

 

1.        Representations   and   Warranties of SPAR:   SPAR hereby   represents   and

         warrants that:

 

          (a)       SPAR is a company duly   incorporated   and validly   existing in

                  good   standing   under laws of Nevada and it has the   corporate

                  power to own its   property and to carry on its business as now

                   being conducted.

 

         (b)       SPAR   has   full   power   and    authority   to   enter   into   this

                  Agreement,   to subscribe to, purchase and own the Shares so as

                  to have a 51% percentage   ownership of the

 

                                        7

<PAGE>

 

                  outstanding   equity   Shares of the   Company and to perform its

                  other obligations under this Agreement, all of which have been

                  duly authorized by all proper and necessary   corporate   action

                  by SPAR. No consent or approval of   stockholders or consent or

                  approval   of,   notice   to   or   filing   with   any   governmental

                  authority   is   required   as a   condition   to the   validity   or

                  enforceability of this Agreement as to SPAR.

 

         (c)       This   Agreement   constitutes   the   valid and   legally   binding

                  agreement of SPAR enforceable in accordance with its terms.

 

         (d)       There are no   provisions   of its   memorandum   of   association,

                  articles of association or other organizational documents, and

                  no   proceedings   pending   or   threatened   before   any court or

                  governmental or administrative   agency,   that would reasonably

                  be expected to affect the validity or   enforceability   of this

                  Agreement as to SPAR or that would   reasonably   be expected to

                  materially    adversely   affect   the   financial    condition   or

                  operations of SPAR.

 

         (e)       SPAR is not a party to or   otherwise   bound by any contract or

                  agreement   which   in   any   manner   would   prohibit   SPAR   from

                  subscribing to or owning its 51%   percentage   ownership in the

                  Company or performing any of its other   obligations under this

                  Agreement.

 

2.        Representations    and    Warranties   of   SOLUTIONS:    SOLUTIONS    hereby

          represents and warrants that:

 

         (a)       SOLUTIONS is a corporation duly organized and validly existing

                  in   good   standing   under   the   laws of   India   and it has the

                  corporate   power   to own   its   property   and to   carry   on its

                  business as now being conducted.

 

         (b)       SOLUTIONS   has full   power and   authority   to enter   into this

                  Agreement,   to subscribe to,   purchase and own Shares so as to

                  have a 49% percentage   ownership of the outstanding   Shares of

                  the Company and to perform   its other   obligations   under this

                  Agreement,   all of which   have   been   duly   authorized   by all

                  proper and necessary corporate action by SOLUTIONS. No consent

                  or approval of   stockholders or consent or approval of, notice

                  to or filing with any governmental   authority is required as a

                  condition to the validity or   enforceability of this Agreement

                  as to SOLUTIONS.

 

         (c)       This   Agreement   constitutes   the   valid and   legally   binding

                  agreement   of SOLUTIONS   enforceable   in   accordance   with its

                  terms.

 

         (d)       There are no provisions of its organizational   documents,   and

                  no   proceedings   pending   or   threatened   before   any court or

                  governmental or administrative   agency,   that would reasonably

                   be expected to affect the validity or   enforceability   of this

                  Agreement as to SOLUTIONS or that would reasonably be expected

                  to   materially   adversely   affect the   financial   condition or

                  operations of SOLUTIONS.

 

                                       8

<PAGE>

 

         (e)       SOLUTIONS is not a party to or otherwise bound by any contract

                  or   agreement   which in any manner would   prohibit   SOLUTIONS.

                  from subscribing to or owning its 49% percentage   ownership in

                  the Company or performing any of its other   obligations   under

                  this Agreement.

 

3.        Indemnification

 

         (a)       A Shareholder ("Indemnifying Shareholder") shall indemnify and

                  hold   harmless   the   other    Shareholder    (the    "Indemnified

                  Shareholder"),    their   nominee   Directors   on   the   Board   of

                  Directors   of the Company   from and against any and all costs,

                  losses, claims, damages and liabilities,   including reasonable

                  attorneys' fees,   incurred by the Indemnified   Shareholders or

                  such other Persons,   arising out of (i) any   representation or

                   warranty   of   the   Indemnifying   Shareholder   hereunder   being

                  untrue or incorrect and/or (ii) the Indemnifying Shareholder's

                  failure   to   comply   with any of its   obligations   under   this

                   Agreement including the other terms,   conditions or agreements

                  contained herein.

 

         (b)       The Company,   to the extent permitted by applicable law, shall

                  indemnify   and hold harmless   each   relevant   Shareholder   and

                  their   nominee   Directors   on the   Board of   Directors   of the

                  Company   (each an   "Indemnified   Person") from and against any

                  and   all   costs,   losses,   claims,   damages   and   liabilities,

                   including    reasonable    attorneys'   fees,   incurred   by   such

                  Indemnified   Person or to which such Indemnified Person may be

                  subject   arising out of or in connection with any legal action

                   (and the   defense   thereof)   commenced   as a result   of, or in

                  connection   with or arising   out of the   Indemnified   Person's

                  actions or position with respect to the Company, except to the

                  extent of the fraud, gross negligence or willful misconduct of

                  the Indemnified Person.

 

If an   Indemnified   Shareholder   makes a claim   under   this   Article   6A (3) for

payment or   reimbursement   of   expenses,   the same   shall be paid or   reimbursed

promptly upon receipt of appropriate documentation relating thereto and shall be

paid in full by the Party to whom the claim is made.

 

Article 6B         Additional Fund Requirements

 

Additional   fund   requirements of the Company in excess of the Share capital may

be met either through:

 

         (i)       the cash flow from time to time of the Company;

 

         (ii)      the   borrowings   facilities   which   the   Company   has from all

                  sources   including   from one or more   Shareholders   or through

                  borrowings from such reputable financial institutions or banks

                  as the Board of   Directors   may from   time to time   determine;

                  provided, however, the Company shall not raise funds through a

                   stock market   transaction   unless SPAR and SOLUTIONS   mutually

                  agree to do so.

 

         (iii)     the issue of such additional securities as are permitted under

                  the   Act   (including   additional   equity   Shares,   subject   to

                  Article 10.2 hereof).

 

                                       9

<PAGE>

 

         Notwithstanding   the foregoing the Parties as   Shareholders   may decide

         that any monies   referred to above may be made available to the Company

         in such other manner as may be agreed between them.

 

         It is   understood   that   and it is a term of this   Agreement   that   any

         borrowings   by the   Company   shall   always   be   consistent   with   sound

         financial policies.

 

                   CHAPTER II: GENERAL MEETING OF SHAREHOLDERS

 

Article 7.         Annual and Extraordinary General Meeting

 

Annual General Meeting: Subject to the provisions of the Act and the Articles of

Association of the Company,   the Annual General   Meeting of the   Shareholders of

the Company   shall be convened by a resolution   of the Board of Directors of the

Company and held at the registered office of the Company. The Company shall hold

in each   year in   addition   to any other   meetings   of the   Shareholders   of the

Company, a general meeting as its "Annual General Meeting" and shall specify the

meeting as such in the notice   calling it. The Parties agree and undertake   that

they shall exercise their voting rights at meetings of the   Shareholders in such

a manner so as to ensure that the provisions of this Agreement are upheld.

 

Extraordinary   General   Meeting:   Subject to the   provisions   of the Act and the

Articles of Association of the Company, an Extraordinary   General Meeting of the

Company   shall be   convened by a   resolution   of the Board of   Directors   of the

Company whenever deemed necessary. Such meetings shall be held upon the issuance

of a   notice   in   this   behalf,   which   written   notice   shall   be   as   per   the

requirements   under   the Act and   shall be held   with at   least 21 days   notice,

provided that shorter   notice may be given with the consent of the   Shareholders

of the Company.

 

Article 8.         Quorum

 

The quorum   for the   General   Meetings   of   Shareholders   of the   Company   shall

constitute   of at   least   one   duly   appointed   representative   each of SPAR and

SOLUTIONS.   No business   shall be transacted at any General   Meeting   unless the

requisite quorum is present.

 

Article 9.         Resolution

 

Except as expressly   otherwise   provided in the Act,   including   any   subsequent

legislation   substituting   the same,   this Agreement and all   resolutions of the

General   Meeting   of   Shareholders   of   the   Company   shall   be   adopted   by the

affirmative vote of the Shareholders holding a majority of the Shares present or

represented at meeting for which there is quorum.

 

Article 10.        Important Matters

 

Any   resolution   on   the   following   matters   by   the   General   Meeting   of   the

Shareholders   of the   Company   shall   require the   affirmative   vote of at least

three-fourths of the votes of the Shareholders present:

 

1.        Any   amendment   or   modification   of the   Memorandum   and   Articles   of

         Association of the Company;

 

                                       10

<PAGE>

 

2.        Increase or decrease in the authorized capital or paid-up Share capital

         of the Company beyond the limit specified in Article 5.1 hereinabove;

 

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 on Article29);

 

4.        Issuance of debentures;

 

5.        Transfer   of any part or whole of Business of the Company or any change

         in the Business of the Company;

 

6.        Any and all matters relating to dividends of the Company;

 

7.        Dissolution, voluntary winding up or amalgamation of the Company;

 

8.        Change in number or length of tenure of   Directors   on the Board of the

         Company;

 

9.        Investment in other companies by the Company.

 

                   CHAPTER IV: BOARD OF DIRECTORS AND OFFICERS

 

Article 11.        Appointment of Board of Directors of the Company

 

The Board of Directors of the Company shall consist of four (4)   Directors;   two

(2) of whom shall be nominated by SPAR and two (2) of whom shall be nominated by

SOLUTIONS. In case of any increase or decrease in the total number of Directors,

the   representation   stipulated   above shall be   unchanged   and   pro-rata at all

times. The Directors shall not be entitled to receive any compensation.

 

The   Chairman of the Board of Directors of the Company for the first three years

from the Closing   Date shall be a nominee of   SOLUTIONS.   In case of equality of

votes, the Chairman shall not have a second/ casting vote.

 

The   management   of the Company   shall vest with the Board of Directors   and all

decisions at the Board shall be by way of majority vote.   The nominee   Directors

of either Party shall hold office at the pleasure of their respective nominators

and shall be subject to removal by their respective nominating Party. Each Party

agrees to vote for   appointment   or removal of a Director who has been nominated

by the other Party, upon


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