JOINT VENTURE AGREEMENT
This Agreement made as of this 1 day of May, 2001 by and between Xxxxxx
Corporation, a company organized and existing under the law of Japan and having
its principal place of business at 0-0-0, Xxxxxxxxxxxxx-xxxxx, Xxxx-xx, Xxxxx,
Xxxxx (hereinafter called "XXXXXX") and Spar Group, Inc., a company organized
and existing under the law of State of Delaware, having its principal place of
business at 000 Xxxxx Xxxxxx Xxxx, Xxxxxxxxx, XX, XXX (hereinafter called
"SPAR"),
WITNESSETH THAT:
WHEREAS, XXXXXX is engaged in the retail solution businesses in Japan, having a
wide range of clients and also having various knowledge and human resources with
respect to the retailing businesses in Japan;
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, XXXXXX and SPAR are desirous of organizing a corporation to jointly
conduct retail solution businesses in Japan (hereinafter called "Territory").
NOW, THEREFORE, in consideration of the mutual covenants and agreement herein
contained, the parties agree as follows:
CHAPTER 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 Japan as a stock company
(hereinafter called "New Company").
Upon formation, New Company shall become a party to this Agreement.
Upon formation, New Company shall become a party to this Agreement.
Article 2. Business Purposes
The business purposes of New Company shall consist of the followings:
(1) Agency, assistance, instruction and report of storefront sales activities;
(2) Implementation of market research and analysis of results thereof;
(3) Manufacturing and sale of setups used for sales promotion;
(4) Consulting regarding store management;
(5) Development and sale of management system regarding retailing;
(6) Designing and sale of database; and
(7) Any and all businesses incidental or relating to any of the foregoing.
Article 3. Trade Name
New Company shall be named in Japanese as Kabushiki Kaisha SPAR FM JAPAN and in
English as SPAR FM JAPAN, INC.
Article 4. Location
New Company shall have its main office at 0-0-0, Xxxxxxxxxxxxx-xxxxx, Xxxx-xx,
Xxxxx, Xxxxx.
Article 5. Articles of Incorporation
The Articles of Incorporation of New Company shall be in the form attached
hereto as Exhibit A.
Article 6. Capital
The total number of shares which New Company shall be authorized to issue shall
be 1600 and the par value of each share shall be (Y)50,000. At the time of
establishment of New Company, 400 shares shall be issued and fully subscribed by
the parties hereto as follows:
XXXXXX: 200 shares, (Y)10,000,000
SPAR: 200 shares, (Y)10,000,000
All the shares to be issued by New Company shall be nominal and ordinary shares.
Article 7. Payment
Each of the parties hereto shall pay in Japanese Yen and in cash the amount
equivalent to its subscribed shares at par value upon issuance of the shares of
New Company.
CHAPTER II
PREPARATION OF ESTABLISHMENT OF NEW COMPANY
Article 8. Preparation of Establishment of New Company
Each party shall take its role as described below for the preparation of the
commencement of New Company's businesses. Any expenses and costs necessary for
such preparation shall be borne by each party.
A. SPAR shall enter into with New Company 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:
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(1) localize and set up software provided by SPAR to work in Japan;
(2) consult on the organization of merchandising services; and
(3) train the New Company's personnel in how to operate the merchandising
software.
Also, SPAR shall give advice on budgeting and development of each business plan.
X. XXXXXX shall:
(1) arrange contracts with clients;
(2) provide office and facility space to New Company under the terms of a
supply agreement described in Article 26 herein;
(3) set up fast Internet connections for accessing reports and systems;
(4) prepare and send out instructions to merchandisers;
(5) hire merchandisers under terms agreed upon in advance by SPAR and XXXXXX;
(6) gain retailers' permission to do in-store merchandising; and
(7) preparation of annual budget and business plan to be submitted to the Board
of Directors.
CHAPTER III
GENERAL MEETING OF SHAREHOLDERS
Article 9. Ordinary and Extraordinary General Meeting
The Ordinary General Meeting of Shareholders shall be convened by resolution of
the Board of Directors and held in Osaka city, Japan or any other vicinal place
within 3 months from the last day of each accounting period of New Company.
An Extraordinary General Meeting shall be convened by resolution of the Board of
Directors wherever deemed necessary.
Article 10. Quorum
A quorum of the General Meeting of Shareholders shall be the shareholders
present either in person or by proxy representing at least 51 % of all the
issued and outstanding shares of New Company.
Article 11. Resolution
Except as expressly otherwise provided in the Articles of Incorporation of New
Company, this Agreement or the Commercial Code of Japan (Law No. 48 of March 9,
1899, as amended, the
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"Commercial Code"), all resolutions of the General Meeting of Shareholders shall
be adopted by the affirmative vote of shareholders holding at least 51 % of the
shares represented at a meeting for which there is a quorum.
Article 12. Important Matters
In addition to such matters as required by the Articles of Incorporation of New
Company or the Commercial Code, any resolutions of the following matters by the
General Meeting of Shareholders shall require the affirmative vote of at least
two-thirds of the votes of the shareholders present:
(1) any amendment or modification of the Articles of Incorporation;
(2) increase or decrease in the authorized capital or paid-in 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 New Company;
(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 New Company shall consist of 4 Directors; 2 of whom
shall be elected from among those appointed by XXXXXX and 2 of whom shall be
elected from among those appointed by SPAR. The Chairman of the Board of
Directors shall be elected from the Directors by the mutual consultation of both
parties and Xxxxxx Xxxxx shall be the initial Chairman of the Board of
Directors. 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
A President & Chief Executive Officer (CEO) and a Vice President & Chief
Operating Officer (COO) shall be appointed from among Directors appointed by
XXXXXX by the consultation with SPAR. The President & CEO shall be the
Representative Director. The initial President & CEO shall be Juro Yamagishi and
the initial Vice President & COO shall be Xxxxxxxxxx Xxxxxx.
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Article 15. Office of Director
The term of office of each Director shall expire at the close of the Ordinary
General Meeting of Shareholders which relates to the closing of accounts last to
occur within 2 years from his assumption of office.
Article 16. Quorum
Each Director shall have 1 voting right in the Board of Directors. Except as
expressly otherwise required in the Articles of Incorporation of New Company,
this Agreement, or the Commercial Code, a majority of the Directors shall
constitute a quorum at any meeting of the Board of Directors, and all
resolutions shall be adopted by the affirmative vote of more than two-thirds of
the votes of the Directors present.
Article 17. Ordinary Meeting of the Board of Directors
The Ordinary Meeting of the Board of Directors shall be held quarterly, and an
Extraordinary Meeting of the Board of Directors shall be held when necessary,
both of which shall be convened in accordance with the provisions of the
Articles of Incorporation. To the extent then permitted by the Commercial Code
or prevailing interpretation thereof, 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 a unanimous written consent resolution executed by each
member of the Board of Directors. The parties hereto confirm that the prevailing
interpretation in Japan is that meetings of boards of directors may be held by
interactive video conference. For any proposed meeting of the Board of Directors
for which SPAR requests, XXXXXX and SPAR shall cooperate to arrange for such
meetings to be held by video conference. A written record in Japanese of all
meetings of the Board of Directors and all decisions made by it together with
English translation thereof shall be made as promptly as practicable after each
meeting of the Board of Directors by one of the Directors selected by the Board
of Directors at each meeting, kept in the records of the Company and signed or
sealed by each of the Directors.
Article 18. Important Matters
In addition to such matters as required by the Articles of Incorporation of New
Company or the Commercial Code, the following matters of the Board of Directors'
meeting shall require the affirmative vote of more than two-thirds of the votes
of the Directors:
(1) any proposal to the General Meeting of Shareholders or action by the Board
of Directors for the matters as provided in Article 12 hereof;
(2) any investment or commitment of New Company in amounts individually in
excess of (Y)10,000,000 or in the aggregate in excess of(Y)10,000,000;
(3) any loan or credit taken by New Company in amounts individually in excess
of (Y)10,000,000 or in the aggregate in excess of(Y)10,000,000;
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(4) execution, amendment or termination of agreements or commitments with
XXXXXX, 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;
(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 the New Company
in excess of (Y)10,000,000;
(9) approval of annual closing of the books of the New Company and the New
Company's annual financial statements, and changing of accounting policies
and practices or the New Company's accounting periods;
(10) establishment or amendment to the conditions of employment of New Company
Officers, provided that the affirmative vote of SPAR-nominated Directors
shall not be withheld unreasonably;
(11) selling, otherwise disposing of or granting a lien, security interest or
similar obligation with respect to, in one or a series of related
transactions, 10% or more of the net assets of New Company or with respect
to any major strategic asset of New Company that is crucial to New
Company's business;
(12) formation of any subsidiary of New Company, entry into ( or subsequent
termination of) any joint venture, partnership or similar agreement;
(13) entering into, amending or terminating any contract with or commitment to
any Director or shareholder; and
(14) entering into any agreement or commitment to provide goods or services
outside of Japan.
CHAPTER V
AUDIT
Article 19. Accounting Period
The accounting periods of New Company shall end on the 30th day of September
each year.
Article 20. Statutory Auditor
A Statutory Auditor shall be appointed by XXXXXX, and Xxxxxxxxx Xxxxxx shall be
the initial Statutory Auditor.
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Article 21. Inspection of Accounting Records and Books
New Company shall yearly arrange audit on the accounting records and books and
shall submit a report of such audit to each of the parties hereto within 30 days
from the completion of the audit.
Century Ota Showa & Co. shall be the initial accounting firm engaged by New
Company, however, if requested by either P ALTAC or SPAR, New Company shall
engage as its accounting firm an internationally recognized accounting firm that
is not the principal accounting firm of either of P ALTAC or SPAR. Such
accounting firm shall audit the accounting records and books of New Company and
any other matters relating, directly or indirectly, to the financial conditions
of New Company. Any fee for the certified public accountant for inspection and
audit mentioned above shall be borne by New Company. New Company shall keep true
and correct accounting records and books with regard to all of its operations in
accordance with generally accepted accounting principles consistently applied
("GAAP") in Japan. All accounting records and books shall be kept ready for
inspection by the parties hereto or by their authorized representative. If
requested by SPAR, New Company shall cooperate with respect to each financial
period to provide such information as required by SPAR to reconcile New
Company's financial statements with U.S. GAAP reporting requirements of SPAR.
Article 22. Increase of Capital
In case of capital increase of New Company after its establishment, XXXXXX and
SPAR shall have the preemptive right to new shares to be issued for such capital
increase in proportion to their respective shareholdings in New Company.
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 New Company to any third parties.
Article 24. Preemptive Right and Option
1. After 3 years from the effective date of this Agreement, if either party
hereto (hereinafter called "Selling Party") wishes to transfer and sell all but
not less than all of its shares, Selling Party shall furnish to the other party
(hereinafter called "Other Party") a written notice of a proposed purchaser, the
offered purchase price and other major terms and conditions of such proposed
sale.
The Other Party shall have a right to purchase such shares by giving Selling
Party a written notice of its intention to purchase the same within 90 days from
the receipt of Selling Party's notice, upon the same terms and conditions as
described in the Selling Party's notice. The Selling Party may sell such shares
upon the terms and conditions as described in its notice after 90 days from the
date of Other Party's receipt of such notice unless Other Party gives a notice
for its
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purchase of the shares to Selling Party. Unless agreed by the Other Party in
writing, any transferree party shall be subject to this Agreement.
2. After 3 years from the effective date of this Agreement, either party may at
any time make a written offer to buy all of the other party's shares in the New
Company. The other party shall then either accept the offer and sell all of its
shares under the terms and conditions offered, or purchase the offering party's
shares at the same terms and conditions. If the party receiving the initial
offer does not respond to the initial offer within 120 days, the party receiving
the offer shall be deemed to have accepted the offer to sell its shares. The
parties shall cooperate to effect the closing of such purchase and sale of all
of the shares of the New Company held by the selling party within 120 days of
the decision or deemed decision of the second party. At such closing, the
purchasing party shall pay to the selling party the purchase price in cash, and
the selling party shall deliver to the purchasing party share certificates
representing all of the selling party's shares held in New Company, free and
clear of any liens.
Article 25. Cooperation in Financing
1. New Company may borrow up to (Y)300,000,000 as its operating funds, which
shall be guaranteed by XXXXXX if necessary. XXXXXX shall make its reasonable
efforts to enable such borrowing. The terms of the borrowing and any agreement
between New Company and XXXXXX with respect to PALTAC's guarantee shall be
matters subject to Section 18 hereof.
2. New Company may borrow an additional (Y)300,000,000 when it needs additional
funds, if such borrowing is approved in advance by the Board of Directors as an
important matter under Article 18 herein.
3. If XXXXXX pays any creditors of New Company due to a guaranty made by XXXXXX
to such creditors in favor of New Company, SPAR shall reimburse XXXXXX for half
of the amount paid by XXXXXX, but only if New Company's borrowing of such funds
and PALTAC's guaranty of New Company's obligations have been expressly agreed to
in advance by SPAR in writing or in a Board resolution for which both
SPAR-nominated directors have voted affirmatively.
CHAPTER VII
ROLE OF CONTRACTING PARTIES
Article 26. Supply of Office and Facility
XXXXXX shall supply offices and facilities, staff service for general affairs
and finance, and intra company network service, which are determined, at PALTACs
sole discretion, necessary for the operation of New Company after the
consultation between the both parties, to New Company at no charge.
Article 27. Personnel
XXXXXX shall, at its own judgement, second to New Company its personnel who are
appropriate for the start-up of businesses of New Company for a period of 1 year
without any
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consideration. In principle, New Company shall be responsible for the payment of
salaries and benefits for such personnel and all other matters concerning their
employment; however, XXXXXX shall, at its own judgement, pay such salaries, etc.
Article 28. Training
Each party shall provide the appropriate training to employees of New Company
for New Company's operation at its own site. The said training shall be made
upon New Company's request and any necessary expenses for the training shall be
borne by New Company, except as otherwise provided in the License Agreement or
the Supply Agreement.
Article 29. Non-Competition
For 5 years from the Execution Date of this Agreement, neither SPAR nor XXXXXX
shall, without the prior written consent of the other, engage in, whether
directly or indirectly, Merchandising Services (as defined in the License
Agreement) in Japan or any other businesses then competitive with New Company in
Japan. However, in the event that SPAR enters into a contract with a customer
that covers more than one country and the scope of such agreement includes
services in Japan, SPAR shall not be prohibited from entering into or performing
such agreement, provided that SPAR shall make commercially reasonable efforts to
enable New Company to participate in and be fairly compensated for providing
services to any such customer.
CHAPTER VIII
AMENDMENT FOR PUBLIC OFFERING
Article 30. Public Offering
Both parties acknowledge that New Company may attempt to become a listed company
or over-the-counter company on the Osaka Stock Exchange, Tokyo Stock Exchange or
any other stock exchange or public market in Japan ( Public Offering ). Both
parties acknowledge that the number of issued shares, the number of
shareholders, the paid-up capital, profit, transaction with each party, the
seconded employees of New Company will be reviewed and instructed for amendment
by the relevant governmental or regulatory authorities in accordance with those
bodies' rules or guidelines for a Public Offering. If both parties agree to
undertake a Public Offering pursuant to Article 12 above, both parties shall
discuss and reasonably cooperate with each other to amend this Agreement and/or
the License Agreement in order to complete the Public Offering of New Company.
Any changes to the License Agreement will be effective upon consummation of the
Public Offering (but not before), and subject to the approval of the boards of
directors of New Company, XXXXXX and SPAR.
CHAPTER IX
CONFIDENTIALITY
Article 31. Confidential Information
XXXXXX and SPAR shall keep secret and retain in strict confidence any and all
confidential information and use it only for the purpose of this Agreement and
shall not disclose it to a third
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party without the prior written consent of the disclosing party unless the
receiving party can demonstrate that such information (i) has become public
other than as a result of disclosure by the receiving party, (ii) was available
to the receiving party prior to the disclosure by the disclosing party with the
right to disclose, or (iii) has been independently acquired or developed by the
receiving party.
CHAPTER X
GENERAL PROVISIONS
Article 32. Effective Date
This Agreement shall become effective at the time of execution hereof.
Article 33. Termination
1. If either party transfers its shares in New Company to the other party hereto
in accordance with Article 24 hereof, this Agreement shall terminate. If either
party transfers its shares in New Company to another party, unless expressly
agreed by the non-transferring party in writing, this Agreement shall be
assigned to and binding upon such third party, provided that the assigning party
shall remain liable for all legal acts with respect to this Agreement or New
Company from before the Effective Date of such assignment.
2. Either party not in breach of this Agreement may terminate this Agreement by
written notice to the other party if any breach shall not have been corrected by
the other party in breach within 60 days after written notice is given by such
party not in breach complaining of such breach.
3. Either Party may terminate this Agreement without giving a notice in the
event of one or more of the followings:
(a) Appointment of a trustee or receiver for all or any part of the assets of
the other party;
(b) Insolvency or bankruptcy of the other party;
(c) Assignment of the other party for the benefit of creditor;
(d) Attachment of the assets of the other party;
(e) Expropriation of the business or assets of the other party; and
(f) Dissolution or liquidation of the other party.
If either party is involved in any of the events enumerated in (a) through (f)
above, it shall immediately notify the other party of the occurrence of such
event.
4. In case of the termination of this Agreement pursuant to Article 32.2 or
Article 32.3, the party terminating in accordance with this Agreement shall have
an option to purchase the shares of the other party at the book value to be
decided by an internationally recognized accounting
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firm that is not the principal accounting firm of either party, if either party
so requests, or to have New Company dissolved.
5. Upon termination of this Agreement or SPAR's ceasing to hold at least 50% of
the shares in New Company, the License Agreement shall terminate immediately if
still in effect.
Article 34. Force Majeure
Neither party shall be liable to the other party for failure or delay in the
performance of any of its obligations under this Agreement for the time and to
the extent such failure or delay is caused by riots, civil commotions, wars,
hostilities between nations, governmental laws, orders or regulations,
embargoes, actions by the government or any agency thereof, acts of God, storms,
fires, accidents, strikes, sabotages, explosions, or other similar contingencies
beyond the reasonable control of the respective parties.
Article 35. Notice
All notices, reports and other communications given or made in accordance with
or in connection with this Agreement shall be made in writing and may be given
either by (i) personal delivery, (ii) telex or facsimile transmission or (iii)
registered air mail, if properly posted, with postage fully prepaid, in an
envelope properly addressed to the respective parties at the address set forth
below or to such changed address as may be given by either party to the other by
such written notice. Any such notice, etc. by personal delivery or telex or
facsimile transmission shall be deemed to have been given as of the date so
delivered or transmitted. Any such notice, etc. by registered air mail shall be
deemed to have been given 7 days after the dispatch. In any event, if any
notice, etc. is received other than the regular business hours of the recipient,
it shall be deemed to have been given as of the following business day of the
recipient.
To: XXXXXX; 0-0-0, Xxxxxxxxxxxxx-xxxxx, Xxxx-xx, Xxxxx, Xxxxx
SPAR; 000 Xxxxx Xxxxxx Xxxx, Xxxxxxxxx, XX, XXX
Article 36. Assignment
This Agreement and the rights and obligations hereunder are personal to the
parties hereto, and shall not be assigned by either of the parties to any third
party.
Article 37. Arbitration
All dispute, controversies, or differences which may arise between the parties
hereto, out of or in relation to or in connection with this Agreement, shall be
finally settled by arbitration in Osaka, Japan in accordance with the rules of
the Japan Commercial Arbitration Association if initiated by SPAR, or in New
York City in accordance with the International Arbitration Rules of the American
Arbitration Association if initiated by XXXXXX. The arbitration shall be
conducted by 3 arbitrators in the English and the Japanese languages. The
arbitration award shall be final and legally binding upon both parties.
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Article 38. Implementation
The shareholders hereby agree, for themselves, their successors, heirs and legal
representatives, to vote at shareholders' meetings, and to cause the Directors
they nominate to vote at Board meetings and to carry out their duties, to
prepare, execute and deliver or cause to be prepared, executed and delivered
such further instruments and documents, to take such other actions and to cause
the Articles of Incorporation of New Company, New Company work rules and other
rules and Commercial Registry and any other document to be amended or adopted as
may be reasonably required to effect the provisions and intent of this Agreement
and the transactions contemplated hereby.
Article 39. Governing Law
This Agreement and all questions arising out of or under this Agreement shall be
governed by and interpreted in accordance with the laws of Japan.
Article 40. Waiver
Any failure of either party to enforce, at any time or for any period of time,
any of the provision of this Agreement shall not be construed as a waiver of
such provisions or of the right of such party thereafter to enforce each and
every such provision.
Article 41. Entire Agreement
This Agreement constitutes the entire and only agreement between the parties
hereto with respect to the subject matter of this Agreement and supersedes any
other commitments, agreements or understandings, written or verbal, that the
parties hereto may have had. No modification, change and amendment of this
Agreement shall be binding upon the parties hereto except by mutual express
consent in writing of subsequent date signed by authorized officer or
representative of each of the parties hereto.
Article 42. Headings
The headings of articles and paragraphs used in this Agreement are inserted for
convenience of reference only and shall not affect the interpretation of the
respective articles and paragraphs of this Agreement.
Article 43. Language
This Agreement has been executed in the English and the Japanese languages. If
there is any discrepancy or inconsistency between the English and the Japanese
versions, the English version shall prevail.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in 2 copies by their respective duly authorized officer or representative as of
the day first above written.
Xxxxxx Corporation
Signature:
/s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: Representative Director & President
Spar Group, Inc.
Signature:
/s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Chairman & CEO
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