JOINT VENTURE ESTABLISHMENT AGREEMENT (English Translation)
JOINT
VENTURE ESTABLISHMENT
AGREEMENT
(English
Translation)
This
Joint Venture Establishment Agreement (the “Agreement”)
is
entered into by and between the parties below as of January 9, 2008.
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Party
A
(Goldenway):
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Goldenway
Nanjing Garment Company Limited
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Ever-Glory
Commercial Center,
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509
Chengxin Thoroughfare,
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Jiangning
Economic and Technical Development Zone
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Nanjing,
PRC
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Legal
Representative: Xxxx Xxxxx
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Title:
President and Chairman of the Board
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Party
B
(La Chapelle):
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Shanghai
La Chapelle Garment and Accessories Company Ltd.
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Xxxx
0000, 270 Caoxi Road, Shanghai, PRC
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Legal
Representative: Xing Jiaxing
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Title:
President
and Chairman of the Board
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RECITALS
WHEREAS,
Party A and Party B intend to jointly establish a new line of ladies’ garments;
WHEREAS,
through negotiations, Party A and Party B have agreed to establish and invest
in
a joint venture in the form of a limited company organized under the laws of
People’s Republic of China;
WHEREAS,
the parties hereby agree to accomplish the establishment and investment in
such
joint venture according to the terms and conditions set forth in this Agreement.
AGREEMENT
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1.
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Property
and Business Scope of the Company.
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a)
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Formation
of the Joint Venture.
Party A and Party B agree to jointly form a PRC limited company by
the
name of “Shanghai LA GO GO Fashion Company Limited” or such other similar
name as approved by the Shanghai government authorities (the “Company”).
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b)
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Registered
Location.
The registered location of the Company shall be Shanghai, PRC.
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1
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c)
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Business
Objective.
The business objective of the Company is to establish and create
a leading
brand of ladies’ garments for the mainland Chinese market.
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d)
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Business
Scope.
The scope of the Company’s business shall be all activities relating to
the development of the “LA GO GO” brand, including marketing and branding
activities, design, production, and sales. Party A and Party B each
acknowledge and agree that Party B has transferred all of its rights
and
ownership in the “LA GO GO” brand name (including any related brand names)
to the Company, for good and valuable consideration, and that such
transfer is valid and complete.
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2.
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Registered
Capital; Relative Ownership and Control.
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a)
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The
registered capital of the Company shall be XXX 00 million, with RMB
6
million contributed by Party A, and RMB 4 million contributed by
Party B.
Accordingly, Party A shall be the holder of 60% of the registered
capital,
and Party B shall be the holder of the remaining 40% of registered
capital, of the Company. This registered capital is to be deposited
into a
Company bank account by each respective party no later than January
30,
2008, which bank account shall be made open for examination by the
appropriate governmental
authorities.
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b)
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Upon
establishment, the Company shall issue investment certificates to
Party A
and Party B, certifying as the percentage of registered capital held
by
each party.
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c)
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The
parties shall endeavor to make future increases in the registered
capital
of the Company in proportion to their respective percentage holdings
of
the registered capital immediately following this Agreement, and
shall not
deviate from such percentages without the consent of both parties.
In all
cases, the percentage of the registered capital of the Company held
by
each party shall be increased in proportion to the relative amounts
of
capital contributed to the Company. Notwithstanding the foregoing,
each
party shall undertake best efforts to make any and all required capital
contributions and shall not permit either party’s percentage interest to
fall below 30%.
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3.
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Government
Application and Filings.
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a)
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Party
A and Party B shall each appoint a representative for purposes of
ratifying actions taken to establish the Company, to handle filings
and
reports to governmental agencies, and to ensure that corporate documents
and papers submitted to government agencies are true, complete, and
effective.
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b)
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The
Company shall open a temporary bank account in its name immediately
following the preliminary ratification and registration of the Company’s
name with the relevant government
authorities.
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2
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4.
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Company
Charter.
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a)
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Actions
Requiring Shareholder Approval.
None of the following actions or modifications to the Company or
its
charter may be made without the approval of holders of registered
capital
of the Company possessing at least 2/3rds of the voting power of
the
Company:
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(1)
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Modification
of Company charter, including any increase or decrease of registered
capital; or
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(2)
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Merger,
spin-off, purchase and sale of the Company or substantially all of
its
assets, liquidation, bankruptcy, dissolution of the
Company.
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b)
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Responsibilities
of Parties.
The parties agree that the Company shall be organized in such manner
that
Party B shall be primarily responsible for appointing design and
sales
teams, while Party A shall be responsible for appointing accounting
and
financial managers and supervisors in charge of production. The parties
further agree that Party A and Party B shall jointly appoint personnel
in
charge of procurement and logistics. At such time that the parties
agree
that the Company has reached the point of steady operations, the
board of
directors shall engage a new general manager and appoint directors
of
design and sales.
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5.
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Transfer
of Shareholdings.
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a)
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No
transfer of equity interest in the Company shall be transferred to
any
third party without the prior consent of holders of at least 2/3rds
of the
registered capital of the Company. Any attempted transfer in violation
of
this provision shall be void ab initio.
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b) |
In
the event of an approved transfer of equity interests in the Company,
the
then existing shareholders of the Company shall have a right of first
refusal to acquire the equity interest that is proposed to be transferred,
in an amount that is in proportion to the percentage interest held
by such
non-transferring shareholders.
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6.
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Development
Plan.
The parties agree to make best efforts to cooperate with each
other to
develop and agree upon a feasible three-year development plan
and
financial budget, which shall be outlined in as much detail as
practicable.
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Party
B
shall undertake its best efforts to position the “LA GO GO” brand as middle and
high grade label in ladies’ garments, characterized by high quality, original
style, and reasonable price, which at the same time, will be generally
consistent and compatible with the design, image and style of the current brands
that have been developed and now owned by Party B.
3
In
order
to achieve rapid realization of sales revenue, within one month after
establishment of the Company, Party B agrees to select and engage at least
20
experienced retailers in Shanghai, Chengdu, Nanjing, Suzhou, Beijing, Tianjin
to
exclusively carry and sell the LA GO GO line for 2008. These shops shall be
initially selected by Party B, and the selections shall be subject to the
reasonable approval of Party A.
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7.
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Declarations,
Commitments and Covenants
of the Shareholders.
The parties hereby covenant, as shareholders, to do the following:
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a)
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Abide
by the Company Charter.
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b)
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Pay
the full amount of each party’s capital contribution according to the
amount and terms agreed upon under this
Agreement.
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c)
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Closely
guard the company’s commercial and technical secrets, and refrain from
engaging in same or similar business activities with other companies
or
organizations in any form, and to refrain from transferring or disclosing
technical items related to the Company to any third
party.
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d)
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Ensure
a timely and full support the Company in connection with its filings,
application and reports to business administration
authorities.
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e)
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Receive
dividends or other benefit allotments according to shareholding
ratios.
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f)
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Execute
voting rights according to shareholding
ratios.
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g)
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Monitor
the Company’s operational activities, and make provide guidance,
suggestions and make necessary
inquiries.
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h)
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When
needed, transfer, donate or relinquish such shareholder’s holdings
according to PRC national law, administration rules or the Company
Charter.
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i)
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In
the event of a termination or liquidation of the Company, to have
the
remaining assets allocated as per the shareholding
ratio.
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j)
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Comply
with all of other rights and obligations stipulated in the local
or
national laws, administration rules and the Company
Charter.
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4
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8.
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Prohibited
Actions.
The parties agree that the parties shall be forbidden to take any
action
that xxxxx the interests of the Company, that is pursued in the name
of
the Company. Any benefit gained through such an action should be
relinquished to the Company, any loss caused by such action shall
be paid
for and/or compensated by the responsible party according to applicable
law.
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9.
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Material
Transactions.
The Company shall seek to enter into agreements for all material
transactions, as well as any transactions relating to this Agreement,
and
such agreements shall be subject to the approval of the board of
directors.
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10.
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Board
of Directors.
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a)
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General.
The business and affairs of the Company shall be governed at the
direction
of the board of directors, which shall be comprised of five (5) directors.
Three (3) of such five directors shall be designated by Party A,
who shall
initially be (i) Xxxx Xx-xxx, (ii) Zhu Jun, and (iii) Chen Xi-lin.
Two (2)
of the five directors shall be designated by Party B, and shall initially
be (i) Xing Jia-xing, and (ii) Xxxxx
Xxx-ling.
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b)
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Initial
Board of Directors and Management.
The company shall have one (1) chairman of the board of directors,
who
initially be Xxxx Xxxxx is the board chairman. The Company shall
have one
(1) vice-chairman of the board of directors, who shall initially
be Xing
Jiaxing. The Company shall have one (1) general manager who initially
shall also be Xing Jiaxing. The Company shall have a chief supervisor,
who
shall initially be Xxx Xxxxx.
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c)
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The
Authority of the Board of Directors.
The board of directors of the Company shall have the power and authority
to:
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(1)
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Convene
shareholder meetings and report Company developments in such
meetings.
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(2)
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Carry
out the resolutions of the shareholders passed in shareholder
meetings.
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(3)
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Determine
the operation and investment plans of the
Company.
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(4)
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Formulate
plans and projections for the Company’s yearly financial budget and year
end accounts.
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(5)
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Formulate
plans for the allocation of the Company’s profits and losses.
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(6)
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Approve
the increase or decrease of registered capital of the Company (subject
to
requisite shareholder approval), the issuance of bonds or other
securities.
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(7)
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Prepare,
create and approve plans with respect to any material purchase of
assets,
merger, spin-off or dissolution of the
Company.
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(8)
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Approve
investments by the Company, pledges of Company assets, and any other
surety commitment or relationship of the Company subject to and within
the
authority granted by the shareholders.
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(9)
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Employ
or dismiss company managers, and the secretary of board meetings;
subject
to consideration of input from company managers, employ or dismiss
deputy
company managers, the chief accountant or other senior administrative
staff; and determine the payments, rewards and punishments of the
above.
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(10)
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Amend
the Company Charter, subject to approval of the shareholders as set
forth
in this Agreement.
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(11)
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Receive
and review reports made by the managers of the Company and review
and
assess such reports.
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(12)
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Execute
any and all other rights authorized by applicable laws and rules,
the
Company Charter, and the authority granted by shareholder action
at
shareholder meetings.
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d)
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Board
Procedures.
The board of directors shall establish procedures for conducting
board
meetings in order to ensure efficient and rational deliberations.
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e)
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Investment
Guidelines.
The board of directors shall clearly define guidelines for the general
manager for the investment of the assets of the Company, and shall
establish formal procedures for the audit process for Company investments.
Any major investment undertaking shall be submitted to the shareholders
for their approval, after examination and feedback regarding investment
decisions by experts or professionals selected by the
board.
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11.
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Taxation,
Accounting, Auditing and Labor Management.
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a)
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The
Company
shall pay all taxes in accordance with applicable laws and
regulations.
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b)
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The
Company’s
fiscal year shall be from January 1st
to
December 31st
every year.
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c)
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The
Company
shall establish an internal system of accounting that shall accord
with
the financial and accounting regulations of People’s Republic of
China.
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d)
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The
parties shall cooperate to implement the three-year development
plan and
financial budget created and approved by the board of directors
under this
Agreement. The Company shall compile monthly financial statements
within
10 days after the end of each month within each fiscal year, and
shall
cause a copy of such reports to be submitted to each shareholder
and each
director. The Company shall prepare its year-end financial statements
within 30 days after the end of each fiscal year and submit a copy
of such
year-end financial statements to each shareholder and each director.
The
year-end financial statements shall be reviewed and confirmed as
true and
accurate by a qualified auditor in accordance with applicable generally
accepted accounting principles in the PRC. In the first 3 months
of each
fiscal year, the general manager shall prompt the accounting and
financial
department of the Company to compile a balance sheet, a statement
of cash
flows, and a profit distribution plan for the most recently completed
fiscal year, and such financial statements shall be made available
for
examination by the board of directors.
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6
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e)
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Each
shareholder at any moment has the right to have the account books
or other
records audited by
the Company’s public accountants within 3 months after the end of a fiscal
year, at such shareholder’s own expense.
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f)
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The
recruitment, employment, dismissal, payment and granting
of benefits or awards to the employees of the Company, shall be
stipulated
in labor contracts entered into collectively or separately, in
a manner
discussed and approved by the board of directors, and in accordance
with
the national administration rules and measures relating to labor
management. All the labor contracts that are entered into shall
be added
to the official records of the local labor management
authorities.
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12.
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Consequences
of Events of Default.
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a)
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Any
party who fails
to pay the full amount such party’s capital contribution stipulated in
this Agreement, if such failure continues for 30 days, shall have
its
shareholding ratio adjusted to reflect the actual relative amount
of
registered capital invested.
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b)
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If
this Agreement
or any portion hereof cannot be performed by a party due to the
breach or
non-compliance of the other party, the breaching party shall bear
the
consequences of the default. If this Agreement or any portion hereof
cannot be performed by a party due to the breach or non-compliance
of more
than one party, each breaching party shall be held responsible
for such
party’s damages resulting from such breach or non-compliance.
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13.
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Applicable
Law.
This Agreement shall be governed by and interpreted under the laws
of
People’s Republic of China.
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14.
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Dispute
Settlement.
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.
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7
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15.
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Effectiveness
of Agreement.
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).
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16.
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Counterparts.
This Agreement is made in four counterparts with one held by each
of the
parties. 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.
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IN
WITNESS WHEREOF, this Joint Venture Establishment Agreement has been executed
and delivered on the date set forth below.
| Party A: | Goldenway Nanjing Garment Company Limited | |
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| /s/ Xxxx Xx-xxx | ||
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Xxxx
Yi-hua
President
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| Party B: | Shanghai
La
Chapelle Garment and Accessories
Company
Limited
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| /s/ Xing Jia-xing | ||
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Xing
Jia-xing
President
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Date:
January 9, 2008
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