CAPITAL CONTRIBUTION AGREEMENT (English Translation)
CAPITAL
CONTRIBUTION
AGREEMENT
(English
Translation)
This
Capital Contribution
Agreement (the “Agreement”) was entered into by the following parties as of
January 9, 2008.
Party
A (La Chapelle):
|
Shanghai
La Chapelle Garment and Accessories
|
Company
Limited, a company established under the laws
|
of
the People’s Republic of China
|
Room
3300, 270 Caoxi Road, Shanghai, PRC
|
Party
B (founding shareholders):
|
Xing
Jia-xing
|
Room
501, 28 Alley 00,
|
Xxxxxxx
Xxxx, Xxxxxxx Xxxxxxxx, Xxxxxxxx,
PRC
|
ID
Card Number: 000000000000000000
|
Xx
Xxx-xxxx
|
00
Xxxxx Xxxxxxx, Xxxxx Xxxxxxxxx,
|
Taining
County, Fujian Province, PRC
|
ID
Card Number: 350429197307113517
|
Xxxxx
Xxx-ling
|
0xx
Xxxxx, Xxxxxxxx 0, 0 Xxxxxxxx Xxxx,
|
Xxxxxxx,
Xxxxxxx Xxxxxxxx, PRC
|
ID
Card Number:
510104197895941663
|
Party
C (a new shareholder):
|
Wuxi
Xin Xxx Xxxx Investment Company Limited,
a
|
Chinese
limited company established under the laws
of
|
People’s
Republic of China
|
000,
Xxxxxxx Xxxx, Xxxxxxx Community,
|
Beitang
District, Wuxi, PRC
|
Party
D (a new shareholder):
|
Goldenway
Nanjing Garment Company Limited, a
|
wholly
foreign-owned entity and limited
company
|
established
under the laws of the PRC
|
Ever-Glory
Commercial Center,
|
509
Chengxin Thoroughfare,
|
Jiangning
Economic and Technical Development
Xxxx,
|
Xxxxxxx,
XXX
|
0
RECITALS
1.
|
Shanghai
La Chapelle Garment and Accessories Company Limited (hereinafter
referred
to as “La Chapelle” or the “Company”) is a domestic limited company
jointly established in Shanghai under the laws of the People’s Republic of
China, by the founding shareholders of La
Chapelle.
|
2.
|
As
of the date of this Agreement, the capital of La Chapelle registered
with
the PRC business administration authorities amounted to RMB 4.5
million,
consisting of RMB 3.69 million invested by Xing Jia-xing accounting
for
82% of its total registered capital, RMB 0.405 million invested
by Xx
Xxx-xxxx accounting for 9% of its total registered capital, RMB
0.405
million invested by Xxxxx Xxx-ling accounting for 9% of its total
registered capital.
|
3.
|
La
Chapelle contemplates its conversion into a limited corporation
to be
listed on a stock exchange in
China.
|
4.
|
As
agreed by all the parties to this Agreement, Party C and Party
D hereby
agree to make a capital investment in La Chapelle, thereby increasing
its
registered capital, in accordance on the terms and conditions of
the
following Agreement.
|
AGREEMENT
For
valuable consideration which is hereby acknowledged, and after consensus reached
through negotiations, the parties to this Agreement hereby agree as follows:
Article
One
Objective
and Effectiveness of this Agreement
1.
|
This
agreement stipulates the conditions and procedures for Party C
and Party D
to increase Party A’s capital by XXX 00 million. Party C will invest XXX
00 million which shall constitute a 30% equity interest in the
Company,
and Party D will invest XXX 00 million which shall constitute a
10% equity
interest in the Company.
|
2.
|
This
Agreement represents the entire agreement among the parties concerning
the
subject matters in the Agreement, and supersedes any and all previous
agreements, negotiations, writings, stipulations, memoranda or
other
related documents.
|
3.
|
In
order to consummate the transaction in accordance with the terms
of this
Agreement, the parties agree that any and all future agreements
or
arrangements between the concerned parties relating to the subject
matter
herein should be made in accordance with the terms and provisions
of this
Agreement.
|
2
Article
Two
Capital
Investment
1.
|
Provided
that the conditions stated in Article Three are met, Party C and
Party D
agree to invest, and thereby make a capital contribution to Party
A’s
capital, in the aggregate amount of XXX 00 million. Of this total
investment amount (for PRC corporate and accounting purposes),
XXX 0
million will be transferred to La Chapelle’s “registered capital” account,
and the remaining XXX 00 xxxxxxx xxxx xx transferred into La Chapelle’s
accumulated capital account. The entire XXX 00 xxxxxxx xxxxx xx
available
for use by La Chapelle for general corporate purposes, subject
to the
terms of this Agreement.
|
2.
|
Upon
contribution of the aforesaid capital by Party C and Party D, the
registered capital of La Chapelle will increase from RMB 4.5 million
to
RMB 7.5 million, and Party C and Party D shall as a result, hold
30% and
10% (respectively) of the total share capital of La Chapelle. The
shareholders of La Chapelle immediately prior to the investment
shall
collectively hold 60% of La Chapelle’s share capital. Detailed numbers of
the increases and the ratios of investment of all the shareholders
after
this increase are listed
below:
|
Name
of the Shareholders
|
Amount
of Capital Contribution
|
Invested
Amounts and Shareholding Percentage of Each Shareholder upon Completion
of
Transaction
|
||
Total
Amount
of
Contribution
|
Amount
Transferred into Registered Capital
|
Total
Registered Capital
|
Percentages
of Registered Capital
|
|
Xing
Jia-xing
|
0
|
0
|
3,690,000
|
49.2%
|
Xx
Xxx-xxxx
|
0
|
0
|
405,000
|
5.4%
|
Xxxxx
Xxx-ling
|
0
|
0
|
405,000
|
5.4%
|
Wuxi
Xin Xxx Xxxx
|
30,000,000
|
2,250,000
|
2,250,000
|
30.0%
|
Goldenway
Nanjing Garment Company Limited
|
10,000,000
|
750,000
|
750,000
|
10.0%
|
Total:
|
40,000,000
|
3,000,000
|
7,500,000
|
100%
|
3.
|
Party
C and Party D’s investment shall be made in
cash.
|
4.
|
Party
B agrees to the capital investment by Party C and Party D, and
confirms
Party C and Party D’s shareholding ratios resulting from this transaction
as described in this Article Two, and hereby waives its rights
of first
refusal to subscribe for the
investment.
|
3
Article
Three
Terms
and Conditions of Capital Investment
1. |
Within
one week after this Agreement is executed, the founding shareholders
shall
call and hold a special shareholder meeting, at which time all necessary
actions are to be approved, ratified and taken in order to bring the
transaction under this Agreement into effect.
|
2. |
Party
C and Party D shall deposit their agreed investment amounts into La
Chapelle’s bank account, which shall be open to examination by
authorities.
|
3. |
Within
3 working days after the said investment amounts are deposited by Party
C
and Party D, Party A shall engage a public accounting firm to verify
funds
and issue a report concerning the funds.
|
4. |
Within
10 working days after the issuance of the said report, Party A shall
complete the necessary changes to the Company’s registration with the PRC
business administration authorities, and shall complete all other related
formalities.
|
Article
Four
Organization
of the Company and Change in Management
1. |
Party
A, B, C and D unanimously agree that La Chapelle shall change its board
of
directors and management as follows:
|
A. |
Board
of Directors and Senior Administrators.
The new board of directors of La Chapelle shall be comprised of five
(5)
members. Of the five members, three (3) directors shall be appointed
by
the founding shareholders of Xx Xxxxxxxxx, one (1) director appointed
by
Party C, and one (1) director appointed by Party D. The Chairman of
the
Board shall be designated by the largest shareholder of Xx Xxxxxxxxx
who
is a natural person, and such individual shall designate the Chairman
at
the next shareholders meeting of La Chapelle. The general manager shall
be
appointed by the board of directors. The business and affairs of La
Chapelle shall be managed at the direction of the board of
directors.
|
B. |
Conduct
of Board Meetings.
The board of directors of La Chapelle shall conduct meetings at lease
twice per year, and shall require attendance of at least one of the
directors designated by Party C or Party
D.
|
4
2. |
The
resolutions of the board of directors are effective only when being
approved by a majority of the directors who attend each respective
board
meeting. Any major decision of the board of directors must be approved
by
all the directors unanimously. Such major resolutions shall
include:
|
(1) |
Modification
of Company charter, including any increase or decrease of registered
capital;
|
(2) |
Merger,
separation, purchase and sale of the Company or substantially all of
its
assets, liquidation, bankruptcy, dissolution of the
Company;
|
(3) |
Any
single payment or asset disposal amounting to over XXX 0 million in
value;
|
(4) |
Application
for or incurring a loan or surety
obligation;
|
(5) |
Change
of business scope, or development of new businesses other than current
business of the Company;
|
(6) |
Distribution
of any profits;
|
(7) |
Engaging
or re-engaging public accountants, or and change in accounting
policies.
|
Article
Five
Rights
of Shareholders
1. |
The
Right to Demand Repurchase of Shares.
|
(1) |
It
is agreed by all the parties unanimously that if La Chapelle can not
meet
the quantitative conditions that are required in order to list its
shares
as national Class A Shares or Class B Shares by December 31, 2010,
Party B
agrees to, and shall repurchase up to 100% the shares held by Party
C and
Party D, as requested (and in accordance with such percentage requested)
by such parties.
|
(2) |
When
the above-mentioned conditions are met, Party B should execute a
shareholding transfer agreement with Party C and Party D within 2 weeks
after Party C and Party D raised a written request, and proceeds with
the
formalities of application and registration with governmental
administration.
|
(3) |
The
aggregate price in the repurchase of capital should not be less than
the
total capital contribution of Party C or Party D (as applicable), plus
10%
per annum in interest.
|
(4) |
Payment
for the repurchased capital should be made to Party C and/or Party
D or a
representative appointed by such parties within 1 month after the
shareholding transfer agreement was signed. If such payment is not
made in
a timely manner, for each day overdue Party B shall pay Party C and
Party
D an amount equal to 5/10000ths times the total amount of each of Party
C
and Party D’s investment total investment amount, in cash.
|
(5) |
Party
B bears the responsibilities related to the above-mentioned repurchase
obligation.
|
5
2. |
Make
Good Provision.
|
(1) |
The
parties acknowledge that the investment and post-transaction shareholding
ratio of Party C and Party D are based on certain representations made
by
Party B regarding La Chapelle’s future projected profits. Accordingly,
upon the completion of the transactions under this Agreement, if La
Chapelle’s audited net profits for 2008 (“2008 Audited Net Profit”) or
2009 (“2009 Audited Net Profit”) are less than 90% of the 2008 Target or
2009 Target set forth below, the founding shareholders agree that in
either case, Party B shall transfer a percentage equity interest, out
of
Party’s B’s share holdings in La Chapelle, to Party C and Party D, pro
rata in proportion to the holdings of Party C and Party D and in
accordance with the formula set forth below.
|
A. |
The
“2008 Target” is: audited net profit in 2008 of at least XXX 00
million;
|
B. |
The
“2009 Target” is: audited net profit in 2009 of at least XXX 00
million;
|
If
2008
Audited Net Profit is less than 90% of the 2008 Target, then the percentage
ownership of XxXxxxxxxx held by Party C and Party D shall be increased by a
percentage which shall be equal to:
Such
Party’s Initial %
|
(2008
Target - 2008 Audited Net Profit)
|
Interest
After this Transaction
|
X
__________________________________
|
2008
Audited Net Profit
|
If
2009
Audited Net Profit is less than 90% of the 2009 Target, then the percentage
ownership of XxXxxxxxxx held by Party C and Party D shall be again increased
by
a percentage which shall be equal to:
Such
Party’s Initial %
|
(2009
Target - 2009 Audited Net Profit)
|
Adjusted
Under this Agreement
|
X
__________________________________
|
2009
Audited Net
Profit
|
(2) |
The
annual financial reports of the Company shall be audited by a public
accounting firm recognized by and reasonably acceptable to Party C
and
Party D, and each annual audit report shall be completed before the
end of
February of the following year. The share transfer (if applicable)
referred to in subparagraph (1) above shall be completed within 1 month
after the 2008 or 2009 audit reports are
issued.
|
6
3. |
Other
Provisions.
|
(1) |
Party
B shall cooperate to ensure that La Chapelle provides copies of its
monthly financial reports and lists of expenditures to Party C and
Party
D.
|
(2) |
Party
B shall cooperate to ensure that Party C and Party D shall enjoy and
benefit from all of the related rights and interests that they are
entitled to as shareholders, under applicable law and in accordance
with
the internal regulations of La Chapelle.
|
(3) |
Party
C or Party D shall have the right to hire and retain professional auditors
to review La Chapelle’s financial results on a quarterly and annual basis
beginning from the year 2007, and confirm the execution and realization
of
La Chapelle’s three year budget (2007-2009) and submit such auditor
report(s) to the board of directors, at their own
expense.
|
Article
Six
Other
Stipulations
1. |
Upon
completion of the capital contribution under this Agreement, no
shareholder of the Company shall be permitted to pledge its equity
interest in the Company without the express approval of 100% of the
other
shareholders of the Company.
|
2. |
All
employee compensation plans of the Company (including compensation
plans
and policies for the general manager’s compensation) and any modifications
to such plans and policies shall be subject to the approval of the
board
of directors, which specifically shall require unanimous written approval
of all directors on the board.
|
Article
Seven
Covenants
1. |
Certain
Covenants of Party C and Party D.
|
(1) |
Party
C and Party D have been duly authorized in signing this agreement and
in
implementing it, and are not prohibited by any laws or contracts that
have
sanctions or influences on it.
|
(2) |
Upon
execution and delivery of this Agreement by Party C and Party D, this
Agreement constitutes a binding and enforceable legal obligation of
Party
C and Party D.
|
(3) |
In
the event that Party C or Party D breaches or infringes any of its
abovementioned promises, such parties shall bear all the economic and
legal consequences that result, and agree to compensate other parties
to
this Agreement for any losses incurred by them as a result of such
breach
or infringement.
|
7
2. |
Certain
Covenants of Party B.
|
(1) |
In
executing, delivering and performing this Agreement, Party B shall
not
prohibited from entering into other agreements that do not violate
the
terms of this Agreement.
|
(2) |
Upon
execution and delivery of this Agreement, this Agreement constitutes
a
binding and enforceable legal obligation of Party
B.
|
(3) |
In
the event that Party B breaches or infringes any of its abovementioned
promises, Party B shall bear all the economic and legal consequences
that
result, and agrees to compensate other parties of this agreement for
any
losses incurred by them as a result of such breach or infringement.
|
(4) |
Party
B agrees to actively cooperate and assist other parties to this Agreement
to register the capital increase resulting from the transaction hereunder,
and sign any necessary legal documents in a timely manner.
|
3. |
Certain
Covenants of Party A Regarding Use of Proceeds.
|
(1) |
Of
the resulting proceeds of the capital contribution under this Agreement,
La Chapelle agrees to allocate and use no less than RMB 4 million toward
the development of the new garment brand “LA GO GO” in conjunction with
the joint development efforts of Party A and Party
D.
|
Article
Eight
Taxes
and Expenses
The
taxes
and expenses occurred for the increase in registered capital stipulated in
this
Agreement (including but not restricted to auditing fees and attorneys fees)
shall be borne by the party incurring such fees.
Article
Nine
Liabilities
for Breach
Upon
effectiveness of this Agreement, all the parties shall abide by the terms and
conditions as specified in this Agreement. If any party fails to comply with
their obligations to implement this Agreement in accordance with the terms
and
conditions set forth herein, the other parties to this Agreement may demand
compensation from the violating party for any losses that result fron such
non-compliance. If all the parties breach the agreement, each party shall be
accountable for their respective liabilities resulting from such
breach.
8
Article
Ten
Modification
of this Agreement
This
Agreement may be amended only by a unanimous written agreement of all of the
parties to this Agreement. Any amendment so effected shall have the same force
and effect as the original version of this Agreement.
Article
Eleven
Governing
Law and Dispute Resolution
1. |
This
Agreement shall be governed and interpreted under the laws of People’s
Republic of China.
|
2. |
All
disputes arising from the implementation of this agreement shall be
settled through friendly consultation between all the parties concerned.
Where disputes cannot be settled within 30 days after commencement
of
friendly negotiations, any party may bring a lawsuit in the appropriate
People’s Court with proper jurisdiction over the
matter.
|
Article
Twelve
Force
Majeure
1. |
Force
majeure refers any event of circumstance beyond control of the parties,
and beyond the ability of any party to predict, or unavoidable though
predictable, which event or circumstance fully or partially obstructs
such
party from exercising such party’s obligations specified in this
Agreement. Such events include but are not restricted to any strike,
factory closing, explosion, shipwreck, natural disasters or public
enemy
activities, fire, flood, sabotage, accident, war, insurrection, rebellion,
unavailable traffic and any other similar
events.
|
2. |
In
an event of force majeure, if the affected party fails to fulfill any
obligation under this Agreement, then such obstructed obligation ceases
during the period of time when the event persists, and such grace period
shall automatically be extended until the force majeure event or
circumstance ends. No party shall be held liable for failing to fulfill
an
obligation that is obstructed by a force majeure event; provided however,
that if such event or circumstance ends, such party’s obligations shall
resume.
|
3. |
Any
party that encounters a force majeure event of circumstance shall give
prompt written notice to the other parties, and deliver proper evidence
regarding the occurrence and nature of such event. All parties agree
to
undertake best efforts to mitigate the effects of any such event or
circumstances.
|
4. |
In
the event of a force majeure, all the parties should immediate hold
consultations to find out a mutually agreeable method of resolving
the
matter, and shall make every reasonable effort to mitigate its effects.
|
5. |
If
a force majeure event continues for more than 90 days and all the parties
concerned still have not reached a resolution of the matter, any one
party
shall have the right to rescind their rights and obligations under
this
Agreement. If the Agreement is rescinded in such manner, no any new
rights
or obligations shall arise for any party; provided however, all
pre-existing rights and obligations of such party that pre-date this
Agreement (or arising separately from this Agreement) shall remain
unaffected by such rescission.
|
9
Article
Thirteen
Confidentiality
The
parties to this Agreement unanimously agree that any confidential information
acquired from the other parties in connection with the performance of the
transaction hereunder (including but not limited to all forms of operation
data,
financial report forms, contracts or agreements, and other written materials
and
verbal information), personal information, and related materials, and this
Agreement and all attachments, are all deemed to be confidential information
of
the party that furnished such information. Without written authorization of
the
owner of such information, no party shall disclose such confidential information
to any third party without the express consent of the owner of such information.
Any party who infringes this obligation shall be fully liable for all damages
that result from such infringement.
Article
Fourteen
Valid
Confirmation of Notification
Under
this Agreement all valid notices shall be in writing, and delivered by
registered mail, express mail, or personal delivery, and notices shall be deemed
delivered when received by the recipient of such notice.
Article
Fifteen
Subscription,
Effectiveness, and Documentation
1. |
This
Agreement shall become effective when all the parties hereto have executed
and delivered a counterpart to this Agreement (when a natural person
applies a signature and fingerprint of the left hand index finger,
and
when a company applies its corporate seal and appoints a representative
to
sign) with Party A’s seal applied striding on the
slots.
|
2. |
This
Agreement is made in eight counterparts with one held by each of the
parties and one retained by La Chapelle. The remaining copies shall
be
submitted to the PRC governing authorities for purposes of complying
with
applicable formalities of registration. Each counterpart shall be one
and
the same and shall have equal legal
effect.
|
10
IN
WITNESS WHEREOF, this Capital Contribution Agreement has been executed and
delivered on the date set forth below.
Party
A (La
Chapelle):
Shanghai
La Chapelle Garment and Accessories Co.
By:
/s/
Xing
Jia-Xing
Name:
Xing
Jia-Xing
Title:
Chairman
Party
B (founding shareholders):
/s/
Xing
Jia-xing
Xing Jia-xing
/s/
Xx
Xxx-xxxx
Xx
Xxx-xxxx
/s/
Xxxxx
Xxx-ling
Xxxxx
Xxx-ling
Party
C (a new
shareholder):
Wuxi
Xin
Xxx Xxxx Investment Company Limited
By:
/s/
Xxx
Xxxx-Qing
Name:
Xxx
Xxxx-Qing
Title:
President
Party
D (a new
shareholder):
Goldenway
Nanjing Garment Company Limited
By:
/s/
Xxxx
Xx-Xxx
Name:
Xxxx
Xx-Xxx
Title:
President
11