Document:

ex10-8.htm

Exhibit 10.8

 

Executive CHANGE IN CONTROL SEVERANCE AGREEMENT

 

This Executive Change in Control Severance Agreement (as modified, amended or restated from time to time in the manner provided herein, this "Agreement"), is dated as of August 23, 2016 (the "Effective Date"), and is by and between Scott Popaditch, an individual (the "Employee"), and SPAR Group, Inc., a Delaware corporation (the "Company"). The Employee and Company may be referred to individually as a "Party" and collectively as the "Parties".

 

In consideration of past, present and future employment by the Company, the mutual covenants below and other good and valuable consideration (the receipt and adequacy of which are hereby acknowledged by each Party), the Employee and Company, intending to be legally bound, hereby agree as follows:

 

Section 1.     Introduction and At Will Employment. Introduction. The Employee and the Company have entered into this Agreement in order to provide for the terms of the Employee's initial and continued "at will" employment with the Company in accordance with the Offer Letter (as defined below) and to provide for severance payments from the Company to the Employee under certain circumstances if the Employee leaves for Good Reason or is terminated other than in a Termination For Cause during the Protected Period (as all such terms are hereinafter defined). The effectiveness of this Agreement is conditioned on the Employee's execution and delivery to the Company of the other Related Documents (as defined below) and the commencement of his services on or before September 6, 2016 (as more fully provided in the Offer Letter).

 

(b)     Positions. With the approval of the SGRP Board and applicable SGRP Committee(s), the Company hereby appoints Employee to be the Chief Executive Officer and President of the Company as well as a Director, Officer and Executive of the Company (as such terms are defined in the Company's By-Laws), the Employee's start date will be on or before September 6, 2016 (as more fully provided in the Offer Letter), and the Employee will continue (while employed by the Company) to hold such positions for the Protected Period, subject to the pleasure of the Company, the SGRP Board and applicable SGRP Committee(s). The Employee also will be a director or officer of various of the Company's subsidiaries (as and to the extent designated and changed by the Company or the SGRP Board from time to time in its discretion).

 

(c)     At Will Employment. Notwithstanding the potential severance payments and other benefits under this Agreement, the Employee acknowledges and agrees that: (i) this Agreement is not intended, and shall not be deemed or construed, to in any way (A) create or evidence any employment agreement, contract, term or period of any kind or nature or (B) contradict, limit or modify the "at will" nature of the Employee's employment; and (ii) except as otherwise expressly provided in any other written agreement of the Company with the Employee and approved by the SGRP Board , the Employee's employment is "at will" and may be modified from time to time and terminated at any time by the Company in its discretion, for any reason or no reason whatsoever, and without any notice or benefit of any kind (other than any benefit expressly provided under the circumstances by this Agreement). 

 

Section 2.     Certain Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings respectively assigned to them in the By-Laws or SGRP Ethics Code, as applicable. As used in this Agreement, the following capitalized terms and non-capitalized words and phrases shall have the meanings respectively assigned to them:

 

(a)     "§162(m) Covered Officer" shall mean any "covered employee" under (and as defined in) IRC §162(m) for any taxable year (or portion thereof) of the Company if, and only if, the Employee's maximum "remuneration" (as defined in IRC§162(m)(4)(E)) could exceed $1,000,000 if the maximum amount payable under the Company's bonus proposal to the Employee for the year of the Employee's Separation from Service were included in such remuneration (as if all targets were satisfied).

 

(b)     "Authorized Representative" shall mean, for the Company or any SPAR Affiliate for whom the Employee works, any of (i) the Board, (ii) the Chairman, (iii) any other executive officer of the Company or applicable SPAR Affiliate who directly or indirectly supervises or is responsible for the Employee or (iv) any other Representative of the Company or applicable SPAR Affiliate who directly or indirectly supervises or is responsible for the Employee and is authorized to do so by the Board, the Chairman or any such executive officer, in each case other than the Employee.

 

(c)     "Beneficial Owner" shall mean any person who beneficially owns (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act), securities issued by the referenced corporation or other entity, whether directly or indirectly, and whether individually, jointly with any other person(s) or otherwise.

 

(d)     "Board" shall mean the Board of Directors of the Company or (except for purposes of a Change in Control) the applicable SPAR Affiliate.

 

(e)     "Chairman" shall mean the Chairman of the Company or applicable SPAR Affiliate.

 

 

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(f)     "Change in Control" shall mean any of the following:

 

	
(i)
	
when any "person" or "group" (as contemplated in Sections 3(a)(9) and 13(d)(3), respectively, of the Securities Exchange Act), becomes a Beneficial Owner of a Majority of Voting Securities issued by the Company, in each case other than any acquisition of SGRP Securities (A) in any transaction covered by and exempted under clause (iv) of this definition, (B) by the Employee or any group of which the Employee voluntarily is a member, (C) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any SPAR Affiliate or (D) by any corporation or other entity if, immediately following such acquisition, the Beneficial Owners of a Majority of Voting Securities of the acquirer (or its ultimate parent) outstanding immediately after such event are either (1) the persons who were the Beneficial Owners of all or substantially all of the voting SGRP Securities immediately prior to such acquisition and in substantially the same proportions as their ownership immediately prior to such event, or (2) by Robert G. Brown and/or William H. Bartels; 

 

	
(ii)
	
when individuals who are members of the SGRP Board or SGRP Committee as of the date hereof or who are added as hereinafter provided (the "Incumbent Directors") cease for any reason to constitute at least a majority of the SGRP Board or SGRP Committee, as applicable; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the then Incumbent Directors shall thereafter be added (for the purposes hereof) as a member of the Incumbent Directors, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened solicitation of proxies or consents not by or on behalf of at least a majority of the then Incumbent Directors;

 

	
(iii)
	
when any individual shall become the Chairman of the Company if such individual was not the Chairman of the Company as of the Effective Date;

 

	
(iv)
	
any reorganization, merger or consolidation of the Company or any of its subsidiaries, in each case other than (A) any merger of any SPAR Affiliate (other than the Company) into the Company or any of its subsidiaries as the surviving entity, or (B) one in which all or substantially all of the Beneficial Owners' of the voting SGRP Securities immediately prior to such event are, immediately following such event, Beneficial Owners of a Majority of Voting Securities of either the Company or the surviving entity of a merger with the Company (or its ultimate parent), as the case may be, outstanding immediately after such event and in substantially the same proportions as their ownership immediately prior to such event;

 

	
(v)
	
the approval by the Company's Board or stockholders of a plan of complete liquidation of the Company; or

 

	
(vi)
	
any sale or other disposition by the Company of all or substantially all of its assets, in each case other than (A) any assignment or pledge of all or substantially all of the respective assets and properties of the Company and its subsidiaries to one or more lenders as security for their respective credit, indebtedness and guaranties, (B) any acquisition by the Company or any of its subsidiaries of the assets of any SPAR Affiliate (whether by assignment, merger, liquidation or otherwise), or (C) any transaction in which all or substantially all of the Beneficial Owners' of the voting SGRP Securities immediately prior to such event are, immediately following such event, Beneficial Owners of a Majority of Voting Securities of both the Company and the acquiring entity (or its ultimate parent) outstanding immediately after such event and in substantially the same proportions as their ownership immediately prior to such event; 

 

provided, however, that it shall not constitute a Change in Control under clause (i), (ii), or (iv) of this definition if and for so long as Robert G. Brown retains effective control of the Company and continues to be the Chairman of the Company.

 

More than one Change in Control may occur hereunder, and if more than one Change in Control has occurred, any reference to Change in Control shall mean the then most recent Change in Control preceding the Employee's Severance Termination (as hereinafter defined).

 

(g)     "Company's By-Laws" shall mean the By-Laws of the Company, as the same may have been and hereafter may be adopted, supplemented, modified, amended or restated from time to time in the manner provided therein.

 

(h)    "Confidentiality Agreement" shall mean the Confidentiality, Non-Solicitation and Non-Competition Agreement between the Employee and the Company dated as of August 23, 2016, as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided therein.

 

(i)     "Employee's Annual Salary" shall mean the Employee's annual salary rate in effect immediately prior to the Service Termination or, if greater, at the highest annual salary rate in effect at any time during the one-year period preceding the Service Termination, in each case without regard for any bonus, benefit or allowance.

 

(j)      "Employee's Daily Salary" shall mean the daily equivalent (i.e., 1/365th or 1/366th, as applicable) of the Employee's Annual Salary.

 

(k)     "Good Reason" shall mean the occurrence of any of the following events during the Pending Period (as defined below) or Protected Period if not at the Employee's direction or with the Employee's consent in his or her discretion:

 

	
(i)
	
the failure to elect or appoint, or re-elect or re-appoint, the Employee for any period within the Pending Period or Protected Period to, or removal or attempted removal of the Employee from, his position or positions with the Company or applicable SGRP Company (except in connection with the proper termination of the Employee's employment by the Company by reason of death, disability or Termination For Cause);

 

 

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(ii)
	
the assignment to the Employee of any duties materially inconsistent with the status of the Employee's office and/or position with the Company;

 

	
(iii)
	
any material adverse change in the Employee's title with the Company or applicable SGRP Company or in the nature or scope of the Employee's authorities, powers, functions or duties respecting the Company or applicable SGRP Company;

 

	
(iv)
	
the willful delay by the Company or applicable SGRP Company for more than ten (10) business days in the payment to the Employee, when due, of any part of his or her compensation; 

 

	
(v)
	
a material reduction in the Employee's salary or benefits (other than an incentive or discretionary bonus); 

 

	
(vi)
	
a failure by the Company to obtain the assumption of, and agreement to perform, this Agreement by any successor to the Company; or

 

	
(vii)
	
a change in the location at which substantially all of the Employee's duties with the Company or applicable SGRP Company are to be performed in any geographic location materially different from the location in which the Employee is then performing substantially all of his or her duties (excluding those duties performed at home or on the road); 

 

provided, however, that although the appointment of a new Chairman or the loss of a sufficient number of Incumbent Directors may constitute a Change in Control, the appointment of a new Chairman, or requiring the Employee to report to the SGRP Board or a SGRP Committee that has less than a majority of Incumbent Directors, whether in whole or in part, shall not (without more) constitute Good Reason; and provided, further, that Good Reason shall not be considered present unless both (A) the Employee provides written notice to the Company of the existence following a Change in Control of a Good Reason condition described above within a period not to exceed ninety (90) days of the initial existence of the Good Reason condition and (B) the Company does not remedy the condition within thirty (30) days after receipt of such notice (but if remedied the condition shall be considered not to have occurred and not to be a basis for a Severance Termination due to Good Reason). It is intended that "Good Reason" be construed, interpreted and administered as "good reason" (as defined in applicable regulation or other guidance) for purposes of IRC §409A.

 

(l)       "IRC" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, all as in effect at the applicable time.

 

(m)     "Majority of Voting Securities" shall mean securities of the referenced person representing more than fifty percent (50%) of the combined voting power of the referenced person's then outstanding securities having the right to vote generally in the election of directors, managers or the equivalent.

 

(n)     "Offer Letter" shall mean the letter offering at will employment to the Employee by the Company dated as of August 23, 2016, as the same may be extended, supplemented, modified, amended, restated or replaced from time to time in the mutual discretion of the Parties, with the approval of the SGRP Board, in a written document signed by both Parties.

 

(o)     "Protected Days Remaining" shall mean the number of remaining days in the Protected Period following the Severance Termination date (i.e., the number of days in the total applicable Protected Period minus the number of days in the Employment Period); provided, however, that such number shall be limited to a maximum of 730 days for the purposes of this Agreement.

 

(p)     "Protected Period" shall mean the period (i) commending on the effective date of the relevant Change in Control (or such earlier date as a pending Change in Control may have led to a Severance Termination hereunder) and (ii) ending on the expiration of the twelve (12) month period commencing on the effective date of the relevant Change in Control. For the sake of clarity, a Protected Period based on a Change in Control shall restart with each new Change in Control during the term of this Agreement so long as the Employee's employment is then continuing with the Company or applicable SPAR affiliate (or their respective successors in any Change in Control, as applicable).

 

(q)      "Related Document" shall mean the Offer Letter, the Severance Agreement, the Confidentiality Agreement, and this Agreement.

 

(r)      "Representative" shall mean any subsidiary or other affiliate of the referenced person or any shareholder, partner, equity holder, member, director, officer, manager, employee, consultant, agent, attorney, accountant, financial advisor or other representative of the referenced person or of any of its subsidiaries or other affiliates, in each case other than the Employee. 

 

(s)     "Securities Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any corresponding or succeeding provisions of any applicable law (including those of any state or foreign jurisdiction), and the rules and regulations promulgated thereunder, in each case as the same may have been and hereafter may be adopted, supplemented, modified, amended, restated or replaced from time to time.

 

 

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(t)     "Separation from Service" shall mean the Employee's "separation from service" in accordance with (and as defined in) IRC §409A(a)(2)(A)(i) with respect to the Employee's employment with the Company or applicable SPAR Affiliate (or their respective successors in any applicable Change in Control, as applicable).. The Employee shall be presumed to have suffered such a "separation from service" even if the Employee continues to provide bona fide services after such termination or separation to the Company or any SPAR Affiliate (or their respective successors in any applicable Change in Control, as applicable), as an independent contractor or otherwise, so long as those services in the aggregate continue at a level that is less than 50% of the average level of those bona fide services performed during the immediately preceding 36-month period (or the entire Employment Period if less than 36 months).

 

(u)     "Severance Payment Date" shall mean the first to occur of (i) the tenth business day following the Company's receipt of the Release it required under Section 3(a) duly executed by the Employee and such Release is not later revoked by the Employee, provided that such day shall not be sooner than the first business day of the second calendar year if the required return period for such Release overlaps two calendar years, (ii) if the Company gives the Employee notice that it will not require a Release, the tenth business day following the giving of such notice, (iii) if the Company does not send a Release within the thirty day period required under Section 3(a), the tenth business day following the expiration of that period, or (iv) the day (or if not a business day, the immediately preceding business day) that is 2 1⁄2 months after the date of the Severance Termination. 

 

(v)     "SGRP" shall mean SPAR Group, Inc., a Delaware corporation and the Company under this Agreement.

 

(w)     "SGRP Board" shall mean the Board of Directors of SGRP.

 

(x)     "SGRP By-Laws" shall mean the By-Laws of SGRP, including (without limitation) the charters of the SGRP Audit Committee, SGRP Compensation Committee and the SGRP Governance Committee, as the same may have been and hereafter may be adopted, supplemented, modified, amended or restated from time to time in the manner provided therein.

 

(y)    "SGRP Committee" shall mean the SGRP Board's Audit Committee, the SGRP Board's Compensation Committee, the SGRP Board's Governance Committee or any other committee of the SGRP Board established from time to time, as applicable.

 

(z)     "SGRP Company" shall mean SGRP or any direct or indirect subsidiary of SGRP (including the Company). The subsidiaries of SGRP at the referenced date are listed in Exhibit 21.1 to SGRP's most recent Annual Report on Form 10-K as filed with the U.S. Securities and Exchange Commission (a copy of which can be viewed at the Company's website (www.SMFinc.com) under the tab/sub-tab of Investor Relations/SEC Filings).

 

(aa)     "SGRP Ethics Code" shall mean, collectively, the SPAR Group Code of Ethical Conduct for its Directors, Executives, Officers, Employees, Consultants and other Representatives Amended and Restated as of August 13, 2015, and SGRP's Statement of Policy Regarding Personal Securities Transactions in SGRP Stock and Non-Public Information, as amended and restated on May 1, 2004, and as further amended through March 10, 2011, as each may have been and hereafter may be unilaterally adopted, interpreted, supplemented, modified, amended, restated, replaced, suspended or cancelled in whole or in part at any time and from time to time by the SGRP Board or applicable SGRP Committee in its or their discretion, as the case may be, all without any notice to or approval from the Employee

 

(bb)     "SGRP Policies" shall mean any and all of the SGRP's internal accounting, financial and reporting principles, controls and procedures, employment policies and procedures, and corporate codes and policies (including the SGRP Ethics Code) in effect at the applicable time(s), as each may have been and hereafter may be unilaterally adopted, interpreted, supplemented, modified, amended, restated, replaced, suspended or cancelled in whole or in part at any time and from time to time by the SGRP Board or applicable SGRP Committee or by the applicable authorized Executive(s) of SGRP (as defined in its By-Laws) in its or their discretion, as the case may be, all without any notice to or approval from the Employee.

 

(cc)     "SGRP Securities" shall mean any securities issued by SGRP, whether acquired directly from SGRP, in the marketplace or otherwise.

 

(dd)     "SPAR Affiliate" shall mean and currently includes (without limitation) each of the SGRP Companies, the Company's other affiliates (including, without limitation, SPAR Administrative Services Inc., SPAR Business Services, Inc., and SPAR InfoTech, Inc.), and each other entity under the control of or common control with any of the foregoing entities, in each case whether now existing or hereafter acquired, organized or existing.

 

(ee)     "SPAR Group" shall mean the SGRP and all of the other SGRP Companies (including the Company) and all of the other SPAR Affiliates.

 

(ff)     "Tax Adviser" with respect to a referenced determination or calculation shall mean (i) if the required determination or calculation is not a prohibited non-audit service or inconsistent with its independence, the independent public accountants that act as the principal auditors of the Company's financial statements, unless such accountants are unable or unwilling to so act, and (ii) in all other cases, a tax or benefits adviser selected by such accountants on behalf of the Employee and Company, who shall be selected taking into account both experience and reasonableness of cost.

 

 

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(gg)     "Termination For Cause" shall mean any termination of the Employee for any of the following reasons: (i) the Employee's willful, negligent or repeated breach in any material respect of, or the Employee's willful, negligent or repeated nonperformance, misperformance or dereliction in any material respect of any of his or her duties and responsibilities under, (A) any Related Document or other employment agreement or confidentiality agreement with the Company or any Spar Affiliate, (B) the directives of the Board or any Authorized Representative, (C) the SGRP Ethics Code or other SGRP Policies, or (D) the Company's policies and procedures governing his or her employment, in each case other than in connection with any absence or diminished capacity due to illness, disability or incapacity excused by (1) the policies and procedures of the Company, (2) the terms of his or her employment or (3) the action of the Board or any Authorized Representative; (ii) the gross or repeated disparagement by the Employee of the business or affairs of the Company, any SPAR Affiliate or any of their Representatives that in the reasonable judgment of the Company or applicable SPAR Affiliate has adversely affected or would be reasonably likely to adversely affect the operations or reputation of any such person; (iii) any resume, application, report or other information furnished to the Company or any SPAR Affiliate by or on behalf of the Employee shall be in any material respect untrue, incomplete or otherwise misleading when made or deemed made; (iv) the Employee is indicted for, charged with, admits or confesses to, pleads guilty or no contest to, adversely settles respecting or is convicted of (A) any willful dishonesty or fraud (whether or not related to the Company or any SPAR Affiliate), (B) any material breach of any applicable securities or other law, (C) any assault or other violent crime, (D) any theft, embezzlement or willful destruction by the Employee of any asset or property of the Company, any SPAR Affiliate or any of their respective Representatives, customers or vendors, (E) any other misdemeanor involving moral turpitude, or (F) any other felony; (vi) alcohol or drug abuse by the Employee; or (v) any other event or circumstance that constitutes cause for termination of an employee under applicable law and is not described in another clause of this subsection.

 

Section 3.     At Will Employment and Severance Termination. (a) Introduction. Notwithstanding the potential severance and other benefits under this Agreement, the Employee acknowledges and agrees that the Employee's employment is "at will" and may be modified from time to time and terminated at any time (whether during a Protected Period or otherwise) by the Company in its discretion, for any reason or no reason, and without notice or benefit of any kind, other than any benefit expressly provided under the circumstances pursuant to this Agreement. However, without in any way contradicting, limiting or modifying the "at will" nature of the Employee's employment, if during the period pending the applicable Change in Control (the "Pending Period") or within the Protected Period following the applicable Change in Control, the Employee's employment with the Company or other applicable SGRP Company is terminated (i) by such employer for any reason other than the Employee's death or permanent disability or a Termination For Cause (as reasonably determined by SGRP's Compensation Committee), or (ii) by the Employee for Good Reason, and, in the case of any payment or benefit provided hereunder or portion thereof that is deferred compensation subject to IRC §409A (or would be treated as such deferred compensation if the Employee were an Executive or Officer of SGRP), if either such termination also constitutes a Separation from Service (each of which will be referred to as a "Severance Termination"), the provisions of this Section shall apply and the benefits provided by this Section shall be in lieu of any and all other severance or similar termination benefits that might otherwise apply (which other benefits are hereby waived by the Employee in the event such Severance Termination benefits apply).

 

(b)     Release and Non-Compete Agreement Required for Severance Benefits. As a condition precedent to the payment of any benefits under this Agreement in the event of a Severance Termination, the Company may in its discretion elect to require execution and delivery by the Employee of (i) a release substantially in the same form as Exhibit A hereto (a "Release"), (ii) a Confidentiality, Non-Solicitation and Non-Competition Agreement (with, among other things, a five year period of confidentiality, a three year period of non-solicitation and a one-year non-compete following termination) substantially in the same form as Exhibit B hereto (a "Non-Compete Agreement"), and confirmatory resignation letters for each applicable SGRP Company substantially in the same form as Exhibit C hereto (each a "Resignation"), by sending to the Employee a Release and a Non-Compete Agreement signed by the Company (and any applicable SPAR Affiliate) within the thirty(30) day period following the date of such Severance Termination (whether or not delivery is accepted by the Employee). If the Employee has not signed the Release, Non-Compete Agreement and Resignations and sent them back to the Company by the last day of the thirty (30) day period following their by the Employee (or if such last day not a business day, the next succeeding business day), then notwithstanding anything else in this Agreement to the contrary, the Company (and any applicable SPAR Affiliate) shall not be required to make, and the Employee shall not be entitled to receive, any severance payments or other benefits under this Agreement.

 

(c)     Lump Sum Severance Payment; Severance Credit. (i) If a Severance Termination has occurred, then, subject to subsection (b) of this Section, the Company shall promptly (but not later than the Severance Payment Date) pay (or cause the applicable SPAR Affiliate to promptly pay) to the Employee severance pay in a lump sum equal to the sum of the following amounts (collectively, the "Severance Payment"): 

 

	 	
(A)
	
The product of the Employee's Daily Salary times the number of Protected Days Remaining (but not more than 730 days).

 

	 	
(B)
	
the higher of (1) fifteen percent (15%) of such Employee's Annual Salary or (2) the highest annual aggregate bonus amount awarded to the Employee in any of the preceding three employment years, but in any event not more than twenty-five percent (25%) of the Employee's Annual Salary.

 

 

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(ii) The Employee acknowledges and agrees that the Severance Payment is in lieu of all other salary, bonuses, severance or other compensation that may have been payable to the Employee after or respecting the Severance Termination date (other than under the Severance Agreement), and that the "Severance Payment" under (and as defined in) the Severance Agreement shall be credited against and reduce the amount of any Severance Payment due under this Agreement under the circumstances (e.g., no double dipping). The Company acknowledges and agrees that the Severance Payment is in addition to (and not in limitation of) any and all unpaid salary and other compensation earned by and owed to the Employee for any period ending on or before the date of the Severance Termination (including any period ending on that date due to such termination).

 

(d)     Vacation Days. If a Severance Termination has occurred, then, subject to subsection (b) of this Section, the Company shall promptly (but not later than the Severance Payment Date) pay (or cause the applicable SPAR Affiliate to promptly pay) to the Employee an amount equal to his or her accrued and unused vacation days (if any), computed at the Employee's Annual Salary, which the Company shall pay promptly and in accordance with the applicable policy of the Company (or if changed pending or following the applicable Change in Control, in accordance with the immediately preceding applicable policy of the Company). The Employee acknowledges that personal days and sick days are not vacation days for this or any other purpose.

 

(e)     Insurance. In addition, during the two-year period following the effective date of any Severance Termination, the Employee and his dependents shall continue to receive the insurance benefits received during the preceding year as well as any additional insurance benefits as may be provided to executive officers or their dependents during such period in accordance with the Company's policies and practices. The Employee's required co-payments shall not exceed those payable by the other executive officers of the SPAR Group so long as the Employee has timely complied with subsection (a) of this Section. Any applicable COBRA time periods and rights shall run concurrently with the provision of such insurance.

 

(f)     Stock Compensation Awards. If a Severance Termination has occurred, then, subject to subsection (a) of this Section, each stock compensation award granted to the Employee that has not, by its express terms, vested shall be deemed to have vested on the date of any Severance Termination, and shall thereafter be exercisable for the maximum period of time allowed for exercise thereof under the terms of such option, which period shall be determined as if the Severance Termination were a permitted retirement (irrespective of age or subsequent employment) of the Employee for the purpose of interpreting the provisions of any of the Company's stock compensation plans or awards to the Employee; provided, however, that if payment or settlement of any such stock compensation award at such time would result in a prohibited acceleration or deferral under IRC §409A, then such award shall be paid or settled at the time the award would otherwise have been paid or settled under the applicable plan or arrangement relating to such award absent such prohibited acceleration or deferral.

 

(g)     401k. If a Severance Termination has occurred, then, subject to subsection (a) of this Section, on October 15 of the year following the Severance Termination the Company shall pay to the Employee an amount equal to the 401k matching contribution for the year of his Severance Termination in accordance with the Company's 401(k) Plan as if the Employee had been employed for more than 1000 hours during the plan year and employed on the last day of the plan year.

 

(h)     Illness not affecting Good Reason. The Employee's right to terminate his employment for Good Reason pending or following a Change in Control shall not be affected by his illness or incapacity, whether physical or mental, unless the Company shall at the time be entitled to terminate his or her employment by reason thereof.

 

(i)     Parachute Payments. Notwithstanding any other provision of this Section, if it is determined that part or all of the compensation or benefits to be paid to the Employee under this Agreement in connection with the Employee's Severance Termination, or under any other plan, arrangement or agreement, constitutes a "parachute payment" under IRC §280G(b)(2), then the amount constituting a parachute payment that would otherwise be payable to or for the benefit of the Employee shall be reduced (if required under such applicable law), but only to the extent necessary, so that such amount would not constitute a parachute payment. In the event a reduction is required, cash payments shall be reduced first, and then compensation and benefits not payable in cash shall be reduced, in each case in reverse order beginning with payments or benefits that are to be paid the farthest in time from the date of the reduction and in each case after giving effect to any payments and benefits that may have been received prior to termination. Any determination that a payment constitutes a parachute payment shall be made as promptly as practicable following the Employee's termination of employment (but not later than the date payment is required under subsection (b) of this Section) by the Tax Adviser (at the expense of the Company), whose determination shall be final and binding in all cases. Unless the Employee is given notice that a payment (or payments) will constitute a parachute payment prior to the earlier of (1) receipt of such payments or (2) the tenth (10th) business day following his or her Severance Termination, no payment (or payments) shall be deemed to constitute a parachute payment. If the determination made pursuant to this subsection would result in a reduction, the Tax Adviser also shall determine which and how much of any particular entitlement shall be so reduced (to the extent required under such applicable law), in each case after giving effect to any payments and benefits that may have been received prior to such termination, and shall advise the Employee and Company in writing within ten (10) business days of the determination of the reduction in payments. 

 

 

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(j)     Company's Obligations. The Company shall (or shall cause the applicable SPAR Affiliate to) pay to, or distribute to or for the benefit of, the Employee such amounts as are then due to the Employee under this Agreement and shall timely pay to, or distribute to or for the benefit of, the Employee in the future such amounts as become due to the Employee under this Agreement.

 

(k)     Extension of Benefits. Except as otherwise specified in this Section, any extension of benefits following a Severance Termination shall be deemed to be in addition to, and not in lieu of, any period for benefits continuation provided for by applicable law at the Company's, the Employee's or his dependents' expense, as applicable.

 

(l)     Temporary Suspension of Section's Benefits. Notwithstanding any other provision of this Section, to the extent permitted under IRC §409A, in the event that the Employee's Termination For Cause pending or following a Change in Control is solely based on the Employee having been indicted for or charged with any one or more of the deeds described in clause (iv) of the definition of Termination For Cause and there is a bona fide dispute as to whether any such deed(s) occurred, the payments and benefits of this Section (other than those under subsections (c), (d) and (j) hereof respecting vacation pay, insurance and the like) shall be temporarily withheld until the bona fide dispute is considered settled, which settlement shall be deemed to occur at such time as either:

 

	
(i)
	
the first to occur of (A) the final determination by an appropriate authority (including an arbitrator) that the Employee is not guilty or is acquitted of such deed(s), (B) the Company's written acknowledgement that the Employee is not guilty or acquitted of such deed(s) or the substantive equivalent or any settlement with the Employee to any such effect, or (C) the passage of twelve months following such termination without the good faith prosecution (criminal or civil) of the Employee for or arbitration of such deed(s) (the first of which occurs being the "Resolution Date"), in any which case the termination shall be deemed a Severance Termination and, subject to subsection (a) of this Section, the Employee shall be entitled at such time, with (where applicable) payment or commencement, as applicable, to be made within ten business days after the Resolution Date but in no event later then the end of the calendar year containing the Resolution Date, to all the benefits of this Section as of the Severance Date , plus (y) interest at the prime rate per annum on the unpaid amounts outstanding from time to time from the Severance Date through the Resolution Date (the "Resolution Period"), plus (z) an extension of the Employee's benefit periods under subsections (d) and (i) of this Section and stock compensation award exercise period(s) under subsection (e) of this Section equal to the length of the Resolution Period; provided, however, that the extension of the extension of the Employee's stock compensation award exercise period(s) under subsection (e) of this Section shall not extend the exercise period beyond the original term of each stock option (determined without regard to early termination due to cessation of employment); or 

 

	
(ii)
	
the Employee admits or confesses to, pleads guilty or no contest to, adversely settles respecting or is convicted of such deed(s), in any which case the Employee shall not be entitled to any of the benefits of this Section, any salary or bonus pending such resolution, any of the benefits of subsection (c) hereof or any further payments or benefits hereunder other than benefits continuation provided for by applicable law.

 

(m)     Employee's Estate. In the event the Employee shall die after a Severance Termination (including, without limitation, during the Resolution Period), this Agreement and the benefits of this Section shall inure to the benefits of the estate, heirs and legal representatives of the deceased Employee in accordance with his or her will or applicable law, as the case may be.

 

(n)     IRC §409A Override; Voluntary Early Payment. Notwithstanding anything to the contrary in this Agreement, (A) the Company and the SPAR Affiliates do not warrant or guaranty compliance with IRC §409A, (B) the Company and the SPAR Affiliates shall not be liable for any taxes should the Employee be assessed or otherwise become liable for any additional income tax, excise tax, penalty or interest as a result of any payment or provision of any benefit in violation of IRC §409A, (C) it is intended that any payment or benefit provided pursuant to or in connection with this Agreement that is considered to be deferred compensation subject to IRC §409A (and not exempt) shall be provided and paid in a manner, and at such time and in such form, as complies with the requirements of IRC §409A to avoid any unfavorable tax consequences, and (D) without limiting the generality of the foregoing, the following specific rules shall apply in connection therewith: 

 

	
(i)
	
any bonus payments due hereunder that would be penalized under IRC §409A if paid later pursuant to the terms hereof shall instead be paid to the Employee by no later than 2 1/2 months after the end of the calendar year in which the Employee's rights to such bonus payments first vested for purposes of IRC §409A; 

 

	
(ii)
	
if any bonus payments are accelerated hereunder to an earlier payment time that would result in a prohibited acceleration under IRC §409A, then such amount shall instead be paid at the time the amount would otherwise have been paid absent such prohibited acceleration; 

 

	
(iii)
	
subject to any applicable prohibition on acceleration of payment under IRC §409A, the Company may, at any time and in its sole discretion, make a lump-sum payment of or all amounts, or any or all remaining amounts, due to the Employee under this Agreement;

 

 

-7-

 

 

	
(iv)
	
all rights to payments and benefits hereunder shall be treated as rights to receive a series of separate payments and benefits for purposes of and to the fullest extent allowed by IRC §409A;

 

	
(v)
	
the payments or provision of benefits that are considered to be deferred compensation subject to IRC §409A (e.g., not exempt) in connection with the Employee's Separation from Service shall be delayed, to the extent applicable, until six months after the separation from service, or, if earlier, the Employee's death, if the Employee is a "specified employee" under IRC §409A (the "409A Deferral Period"); payments that are otherwise due to be made in installments or periodically during the 409A Deferral Period shall be accumulated and paid in a lump sum as soon as the 409A Deferral Period ends; payments that are due to be made in installments or periodically after the 409A Deferral Period shall be made as scheduled; any benefits that are required to be deferred under IRC §409A during the 409A Deferral Period may be provided during such period at the Employee's expense, with the Employee having a right to reimbursement from the Company once the 409A Deferral Period ends; and payments and benefits that are due to be made or provided in installments or periodically after the 409A Deferral Period shall be made or provided as scheduled; 

 

	
(vi)
	
if this Agreement provides for reimbursements that constitute deferred compensation for purposes of IRC §409A, in no event shall the reimbursements be paid later than the last day of the calendar year following the calendar year in which the related expense was incurred; and

 

	
(vii)
	
if, after application of the foregoing rules and the other provisions of this Agreement (as and to the extent applicable) the Employee would still be reasonably likely to be assessed or otherwise become liable for any additional income tax, excise tax, penalty or interest as a result of any payment or provision of any benefit in violation of IRC §409A under any provision of this Agreement, then effective as of the effective date of this Agreement, (A) if such provision could be amended to eliminate such violation, such provision shall be deemed to have been amended as to the extent necessary to eliminate such violation, and (B) if such provision could not be amended to eliminate such violation, such provision shall be deemed to have been deleted.

 

Section 4.     Waivers of Notice, Etc. Each Party hereby absolutely, unconditionally, irrevocably and expressly waives forever each and all of the following: (a) delivery or acceptance and notice of any delivery or acceptance of this Agreement; (b) notice of any action taken or omitted in reliance hereon; (c) notice of any nonpayment or other event that constitutes, or with the giving of notice or the passage of time (or both) would constitute, any nonpayment, nonperformance, misrepresentation or other breach or default under this Agreement; (d) notice of any material and adverse effect, whether individually or in the aggregate, upon the assets, business, cash flow, expenses, income, liabilities, operations, properties, prospects, reputation or condition (financial or otherwise) of a Party, its Representative or any other person; and (e) any other proof, notice or demand of any kind whatsoever with respect to any or all of a Party's obligations or promptness in making any claim or demand under this Agreement.

 

Section 5.     Mutual Consent to Governing Law. To the greatest extent permitted by applicable law, this Agreement shall be governed by and construed in accordance with the applicable federal law of the United States of America, and to the extent not preempted by such federal law, by the applicable law of the State of New York, in each case other than those conflict of law rules that would defer to the substantive laws of another jurisdiction. The preceding consents to governing law have been made by the Parties in reliance on applicable law, including (without limitation) Section 5-1401 of the General Obligations Law of the State of New York, as amended, as and to the extent applicable. 

 

Section 6.     Mutual Consent to Arbitration and New York Jurisdiction, Etc. (a) Any unresolved dispute or controversy under this Agreement other than any Arbitration Exclusion shall be settled exclusively by arbitration conducted by the American Arbitration Association ("AAA") in accordance with the AAA's Commercial Arbitration Rules then in effect ("AAA Rules") and held in Westchester County, New York. However, no Party shall be required to arbitrate any Arbitration Exclusion, and any Party may pursue any Arbitration Exclusion through any action, suit, proceeding or other effort independent and irrespective of any pending or possible arbitration. "Arbitration Exclusion" shall mean any injunctive or similar equitable relief, any defense or other indemnification by the other Party, the scope or applicability of this arbitration provision, any enforcement of any arbitration or court award or judgment in any jurisdiction or any appeal of any lower court or arbitration decision sought by a Party, and at the option of such seeking Party, any damages or other applicable legal or equitable relief reasonably related to any of the forgoing exclusions. Any Party may object to any proposed arbitrator that (in its reasonable judgment) is not a disinterested unrelated third party or does not have at least a basic knowledge of merchandising businesses, accounting practices and generally accepted accounting principles. The arbitrator(s) shall determine each claim or severable part thereof in accordance with the provisions of this Agreement, shall use supportable quantifiable calculations in determining amounts, shall not add to, detract from, or modify any provision of this Agreement, and shall not "split the difference" or use other similar allocation methods. Discovery will be strictly limited to documents of the Parties specifically applicable to the claims, excluding, however, those documents protected by attorney/client, accountant or other professional or work product privilege (which have not been waived). 

 

(b)     The Parties each hereby consents and agrees that any state or federal court sitting in White Plains, New York, each shall have non-exclusive personal jurisdiction and proper venue with respect to any unresolved dispute or controversy between the Parties under or related to this Agreement respecting any Arbitration Exclusion or other matter under this Agreement that is not subject to arbitration hereunder; provided, however, that such consent shall not deprive any Party of the right to appeal the decision of any such court to a proper appellate court located elsewhere or to voluntarily commence or join any action, suit or proceeding in any other jurisdiction having proper jurisdiction and venue. 

 

 

-8-

 

 

(c)     The preceding consents to the jurisdiction and venue of such arbitrations and courts have been made by the Parties in reliance (at least in part) on Section 5-1402 of the General Obligations Law of the State of New York, as amended (as and to the extent applicable), other applicable law, and the rules of the AAA. No Party will raise, and each Party hereby absolutely, unconditionally, irrevocably and expressly waives forever, any objection or defense to any such jurisdiction as an inconvenient forum, or to any deference to or delay for any arbitration respecting any counterclaim or other matter relating to any Arbitration Exclusion. Except as otherwise provided in this Agreement: (i) in any arbitration, each Party shall pay its own expenses in such matter, including the fees and disbursements of its own attorneys, and half of the fees and expenses of the AAA and the arbitrator(s) costs, as applicable in each case irrespective of outcome; and (ii) in any action, suit or proceeding (other than arbitration), the predominately losing Party shall pay the costs and expenses of the predominately winning Party, including the fees and disbursements of the Parties' respective attorneys and all court costs. 

 

Section 7.     Notice. Any notice, request, demand, service of process or other communication permitted or required to be given to a Party under this Agreement shall be in writing and shall be sent to the applicable Party at the address set forth on the signature page below (or at such other address as shall be designated by notice to the other Party and Persons receiving copies), effective upon actual receipt (or refusal to accept delivery) by the addressee on any business day during normal business hours or the first business day following receipt after the close of normal business hours or on any non-business day, by FedEx (or other equivalent national or international overnight courier) or United States Express Mail, certified, registered, priority or express United States mail, return receipt requested, telecopy, or messenger, by hand or any other means of actual delivery. The Employee also may use and rely on the accuracy of the address of the SGRP designated as its executive office in its most recent filing under the Securities Exchange Act as the Company's address for notices hereunder. The Parties acknowledge and agree that such actual receipt will be presumed with, among other things, evidence of the signature by a Representative of, or adult in the same household as, the receiving Party on a return receipt, courier manifest or other courier's acknowledgment of delivery or receipt.

 

Section 8.     Interpretation, Headings, Etc. In this Agreement: (a) the meaning of each capitalized term or other word or phrase defined in singular form also shall apply to the plural form of such term, word or phrase, and vice versa; each singular pronoun shall be deemed to include the plural variation thereof, and vice versa; and each gender specific pronoun shall be deemed to include the neuter, masculine and feminine, in each case as the context may permit or required; (b) any bold text, italics, underlining or other emphasis, any table of contents, or any caption, section or other heading is for reference purposes only and shall not affect the meaning or interpretation of this Agreement; (c) the word "event" shall include (without limitation) any event, occurrence, circumstance, condition or state of facts; (d) this Agreement includes each schedule and exhibit hereto, all of which are hereby incorporated by reference into this Agreement, and the words "hereof", "herein" and "hereunder" and words of similar import shall refer to this Agreement (including all schedules and exhibits hereto) and the applicable statement(s) of work as a whole and not to any particular provision of any such document; (e) the words "include", "includes" and "including" (whether or not qualified by the phrase "without limitation" or the like) shall not in any way limit the generality of the provision preceding such word, preclude any other applicable item encompassed by the provision preceding such word, or be deemed or construed to do so; (f) unless the context clearly requires otherwise, the word "or" shall have both the inclusive and alternative meaning represented by the phrase "and/or"; (g) each reference to any financial or reporting control or governing document or policy of SPAR shall include those of its ultimate parent, SPAR Group, Inc., or any Nasdaq or SEC rule or other applicable law, whether generically or specifically, shall mean the same as then in effect; and (h) each provision of this Agreement shall be interpreted fairly as to each Party irrespective of the primary drafter of such provision. 

 

Section 9.     Survival of Agreements, Etc. Each of the representations and warranties (as of the date(s) made or deemed made), covenants, waivers, releases and other agreements and obligations of each Party contained in this Agreement: (a) shall be absolute, irrevocable and unconditional, irrespective of (among other things) (i) the validity, legality, binding effect or enforceability of any of the other terms and provisions of this Agreement or any other agreement (if any) between the Parties, or (ii) any other act, circumstance or other event described in this Section; (b) shall survive and remain and continue in full force and effect in accordance with their respective terms and provisions following and without regard to (i) the execution and delivery of this Agreement and each other agreement (if any) between the Parties and the performance of any obligation of such Party hereunder or thereunder, (ii) any waiver, modification, amendment or restatement of any other term or provision of this Agreement or any other agreement (if any) between the Parties (except as and to the extent expressly modified by the terms and provisions of any such waiver, modification, amendment or restatement), (iii) any full, partial or non-exercise of any of the rights, powers, privileges, remedies and interests of a Party or any SPAR Affiliate under this Agreement, any other agreement (if any) between the Parties or applicable law against such other Party or any other person or with respect to any obligation of such Party, which exercise or enforcement may be delayed, discontinued or otherwise not pursued or exhausted for any or no reason whatsoever, or which may be waived, omitted or otherwise not exercised or enforced (whether intentionally or otherwise), (iv) any extension, stay, moratorium or statute of limitations or similar time constraint under any applicable law, (v) any pledge, assignment, sale, conveyance or other transfer by the Company (in whole or in part) to any other person of this Agreement or any other agreement (if any) between the Parties or any one or more of the rights, powers, privileges, remedies or interests of the Company therein, (vi) any act or omission on the part of the Company, any SPAR Affiliate, any of their respective Representatives or any other person, (vii) any termination or other departure of the Employee from his or her employment, whether for cause or otherwise, or any dispute involving any aspect of such employment; or (viii) any other act, event, or circumstance that otherwise might constitute a legal or equitable counterclaim, defense or discharge of a contracting party, co-obligor, guarantor, pledgor or surety; in each case without notice to or further assent from the Employee or any other person (except for such notices or consents as may be expressly required to be given to such Party under this Agreement or any other agreement (if any) between the Parties); (c) shall not be subject to any defense, counterclaim, setoff, right of recoupment, abatement, reduction or other claim or determination that the Employee may have against the Company, any SPAR Affiliate, any of their respective Representatives or any other person; (d) shall not be diminished or qualified by the death, disability, dissolution, reorganization, insolvency, bankruptcy, custodianship or receivership of Party or any other person, or the inability of any of them to pay its debts or perform or otherwise satisfy its obligations as they become due for any reason whatsoever; and (e) with respect to any provision expressly limited to a period of time, shall remain and continue in full force and effect (i) through the specific time period(s) and (ii) thereafter with respect to events or circumstances occurring prior to the end of such time period(s).

 

 

-9-

 

 

Section 10.     Mutual Successors and Assigns, Assignment; Intended Beneficiaries. All representations, warranties, covenants and other agreements made by or on behalf of each Party in this Agreement shall be binding upon the heirs, successors, assigns and legal representatives of such Party and shall inure to the benefit of the heirs, successors, assigns, and legal representatives of each other Party; provided, however, that nothing herein shall be deemed to authorize or permit the Employee to assign any rights or obligations under this Agreement to any other person, and the Employee agrees to not make any such assignment. The representations, agreements and other terms and provisions of this Agreement are for the exclusive benefit of the Parties hereto and the SPAR Affiliates, and, except as otherwise expressly provided herein, no other person shall have any right or claim against any Party by reason of any of those provisions or be entitled to enforce any of those provisions against any Party. The provisions of this Agreement are expressly intended to benefit each of the members of the SPAR Group, who may enforce any such provisions directly, irrespective of whether the Company participates in such enforcement. However, no SPAR Affiliate shall have, or shall be deemed or construed to have, any obligation or liability to the Employee under this Agreement or otherwise.

 

Section 11.    Mutual Severability. In the event that any provision of this Agreement shall be determined to be superseded, invalid, illegal or otherwise unenforceable (in whole or in part) pursuant to applicable law by a court or other governmental authority, the Parties agree that: (a) any such authority shall have the power, and is hereby requested by the Parties, to reduce or limit the scope or duration of such provision to the maximum permissible under applicable law or to delete such provision or portions thereof to the extent it deems necessary to render the balance of such Agreement enforceable; (b) such reduction, limitation or deletion shall not impair or otherwise affect the validity, legality or enforceability of the remaining provisions of this Agreement, which shall be enforced as if the unenforceable provision or portion thereof were so reduced, limited or deleted, in each case unless such reduction, limitation or deletion of the unenforceable provision or portion thereof would impair the practical realization of the principal rights and benefits of either Party hereunder; and (c) such determination and such reduction, limitation and/or deletion shall not be binding on or applied by any court or other governmental authority not otherwise bound to follow such conclusions pursuant to applicable law.

 

Section 12.     Mutual Waivers and Cumulative Rights. Any waiver or consent respecting this Agreement shall be effective only if in writing and signed by the required Parties and then only in the specific instance and for the specific purpose for which given. No waiver or consent shall be deemed (regardless of frequency given) to be a further or continuing waiver or consent. No voluntary notice to or demand on any Party in any case shall entitle such Party to any other or further notice or demand. Except as expressly provided otherwise in this Agreement, (a) no failure or delay by any Party in exercising any right, power, privilege, remedy, interest or entitlement hereunder shall deemed or construed to be a waiver thereof, (b) no single or partial exercise thereof shall preclude any other or further exercise or enforcement thereof or the exercise or enforcement of any other right, power, privilege, interest or entitlement, and (c) the rights, powers, privileges, remedies, interests and entitlements under this Agreement shall be cumulative, are not alternatives, and are not exclusive of any other right, power, privilege, remedy, interest or entitlement provided by this Agreement or applicable law.

 

Section 13.     Mutual Waiver of Jury Trial; All Waivers Intentional, Etc. In any action, suit or proceeding in any jurisdiction brought by any Party hereto against any other Party, each Party hereby absolutely, unconditionally, irrevocably and expressly waives forever trial by jury. This waiver of jury trial and each other express waiver, release, relinquishment or similar surrender of rights (however expressed) made by a Party in this Agreement has been absolutely, unconditionally, irrevocably, knowingly and intentionally made by such Party.

 

Section 14.     Mutual Counterparts and Amendments. This Agreement or any supplement, modification or amendment to or restatement of this Agreement may have been executed in two or more counterpart copies of the entire document or of signature pages to the document, each of which may have been executed by one or more of the signatories hereto or thereto and delivered by mail, courier, telecopy or other electronic or physical means, but all of which, when taken together, shall constitute a single agreement binding upon all of its signatories. This Agreement (i) may not be supplemented, modified, amended, restated, waived, extended, discharged, released or terminated orally, (ii) may only be supplemented, modified, amended or restated in a writing signed by all of the Parties hereto specifically referencing this Agreement by date, title, parties and provision(s) being amended, and (iii) may only be waived, extended, discharged, released or terminated in a writing signed by each Party against whom enforcement thereof may be sought.

 

 

-10-

 

 

Section 15.     Entire Agreement. Each Party acknowledges and agrees that, in entering into this Agreement and the other Related Documents, it has not directly or indirectly received or acted or relied upon any representation, warranty, promise, assurance or other agreement, understanding or information (whether written, electronic, oral, express, implied or otherwise) from or on behalf of the other Party, any of its subsidiaries or other Affiliates, or any of their respective Representatives, respecting any of the matters contained in this Agreement or any other Related Document except for those expressly set forth in this Agreement and the other Related Documents. This Agreement (including all exhibits and schedules) and the other Related Documents contain the entire agreement and understanding of the Parties and supersede and completely replace all prior and other representations, warranties, promises, assurances and other agreements, understandings and information (including, without limitation, all letters of intent, term sheets, existing agreements, offers, requests, responses and proposals and any other severance or termination arrangement or policy of the Company), whether written, electronic, oral, express, implied or otherwise, from a Party or between them with respect to the matters contained in this Agreement and the other Related Documents, as applicable.

 

In Witness Whereof, the Parties hereto have executed and delivered this Agreement (including all schedules and exhibits hereto) through their duly authorized signatories on the dates indicated below and intend to be legally bound by this Agreement as of the Effective Date.

 

	
COMPANY:
	  	
EMPLOYEE: 

	
SPAR Group, Inc.
	  	
Scott Popaditch

	 	 	 
	  	  	  
	
By: 
	 	  	  
	
[ ▲ Executive's Signature ▲]
	  	
[ ▲ Employee's Signature ▲ ]

	
Executive's Name:
	  	  
	
Executive's Title:
	  	
Scott Popaditch

	  	  	
[Employee's Name ▲ Please Type or Print]

	
Date Signed: August 23, 2016
	  	
Date Signed: August 23, 2016

	  	  	  
	
Company's Current Address:
	  	
Employee's Current Address:

	
SPAR Group, Inc. 
	  	
→ Scott Popaditch

	
333 Westchester Avenue, South Building, Suite 204,
	  	
→625 Bentley Lane

	
White Plains, New York 10604
	  	
→ Maitland, FL 32751

	  	  	  

 

 

-11-ex10-26.htm

 Exhibit 10.24

 

DATEDJuly 4th,      ,2014 

 

 

 

JOINT VENTURE CONTRACT 

 

- by and among - 

 

[SPAR China Co., Ltd] 

 

as PARTY A 

 

 

Shanghai Wedone Marketing Consulting Co.,Ltd

 

as PARTY B

 

Shanghai Gold Pack Investment Management Co., Ltd

 

as PARTY C

 

And

 

XU GANG

 

as PARTY D

 

 

 

 

 

IN RESPECT OF THE ESTABLISHMENT OF

 

SPAR (Shanghai) Marketing Management Company Ltd

 

 

1

 

 

[JOINT VENTURE CONTRACT]

 

 

THIS CONTRACT ("Contract") is made in Shanghai, China on July 4th 2014 by and between SPAR China Inc, established and existing under the laws of Hong Kong, with its legal address at Room 3903, Tower 2, Lippo Centre, 89, Queensway Central, Hong Kong (hereinafter referred to as "Party A"), and Wedone Shanghai, Co., Ltd, organized and existing under the laws of P.R. China with its registered address at Rm. A75, Area A, Building 12, No.1-42, Lane 83, Hongxiang North Road, Wanxiang County, Pudong New District, Shanghai, P.R.China (hereinafter referred to as "Party B"), Shanghai Gold Pack Investment Management Co., Ltd, organized and existing under the laws of P.R. China with its registered address at Rm 35, Area B, No. 156 Jiankang Rd., Zhujing County, Jinshan District, Shanghai (hereinafter referred to as "Party C"), and XU Gang, an Australian citizen holding Australian passport of Passport No. E4118178 with his contact address at 34 Craigmore Drive, Kellyville, NSW 2155 Australia (hereinafter referred to as "Party D"). Party A, Party B, Party C and Party D shall hereinafter be referred to individually as a "Party" and collectively as the "Parties". 

 

PRELIMINARY STATEMENT 

After friendly consultations conducted in accordance with the principles of equality and mutual benefit, the Parties have agreed to establish a joint venture in accordance with the relative laws of P.R. China.

 

NOW THE PARTIES HEREBY AGREE AS FOLLOWS: 

 

1. PARTIES TO THE CONTRACT 

 

The Parties to this Contract are: 

 

Party A: SPAR China Inc (思播中国) established and existing under the laws of Hong Kong with its legal address at Room 3903, Tower 2, Lippo Centre, 89, Queensway Central, Hong Kong.

 

 

The Legal Representative of Party A: 

 

Name: JAMES RICHARD SEGRETO

 

Title: Chairman of the Board

 

Nationality: American

 

Party B, Shanghai Wedone Marketing Consulting Co.,Ltd, established and existing under the laws of P.R. China with its legal address at Rm. A75, Area A, Building 12, No.1-42, Lane 83, Hongxiang North Road, Wanxiang County, Pudong New District, Shanghai, P.R.China .

 

 

2

 

 

The Legal Representative of Party B: 

 

Name: James Qian

 

Title: General Manager

 

Nationality: Chinese

 

Party C, Shanghai Gold Pack Investment Management Co., Ltd, established and existing under the laws of P.R. China with its registered address at Rm 35, Area B, No. 156 Jiankang Rd., Zhujing County, Jinshan District, Shanghai 

 

The Legal Representative of Party C: 

 

Name: WANG Guifa

 

Title: Managing Director

 

Nationality: Chinese

 

Party D, XU Gang, an Australian citizen holding Australian passport of Passport No. E4118178 with his contact address at 34 Craigmore Drive, Kellyville, NSW 2155 Australia    

 

 

2. The STATUS OF THE COMPANY 

 

2.1 Establishment of Company 

 

The Parties hereby agree to establish the Company promptly after the Effective Date in accordance with the related laws and regulations of P.R.China. 

 

2.2 Name of Company 

The name of the Company shall be “思播(上海)市场营销策划有限公司”in Chinese, and “SPAR (Shanghai) Marketing Management Company Ltd.” in English. 

 

2.3 Company Legal Address 

The legal address of the Company shall be: Rm 243, Building A, No.559, Wuchang Rd., Hongkou District, Shanghai.

 

2.4 Limited Liability Company 

The form of organization of the Company shall be a limited liability company. Neither Party shall have any liability to the Company except to the extent of its agreed capital contributions. The Company shall be liable to its creditors to the extent of its assets. 

 

 

3

 

 

2.5 Chinese Laws Applicable 

The Company shall be a legal person under the laws of China. The Company shall be subject to the jurisdiction of and shall be protected by all relevant laws, decrees and rules and regulations of China. The activities of the Company shall comply with the Applicable Laws of China. 

 

3. PURPOSE, SCOPE AND SCALE OF OPERATION 

 

3.1 Purpose of Joint Venture The purpose of the joint venture shall be to utilize the combined technological, management, operational and marketing strengths of the Parties within the approved scope of business of the Company to achieve good economic results and a return on investment satisfactory to the Parties. 

 

3.2 Scope of Business 

The scope of business of the Company shall be Marketing Planning and Promotion, Corporate Image Planning, Graphic Production (excluding Advertisements); Conference Service (with license if required). 

 

3.3 Business Plan 

The Business Plan of the Company shall be established by the Board in view of actual market conditions, expected sales volumes, the employees' ability to absorb new technology and any other factors considered important by the Board. Such plan may be expanded or reduced by the Board from time to time in light of market and other relevant conditions. 

 

3.4 Independent Entity 

 

The Company shall conduct its business as an independent economic entity and will operate autonomously. 

 

4. TOTAL INVESTMENT AND REGISTERED CAPITAL 

 

4.1 Total Investment Amount 

The total amount of investment of the Company is RMB¥ 10,000,000. 

 

4.2 Registered Capital Amount 

The Company's registered capital is RMB¥ 7,100,000. 

 

4.3 Contributions to Capital 

 

Party A’s contribution to the registered capital shall be RMB¥ 3,621,000, representing 51% shares of the registered capital.

 

Party B’s contribution to the registered capital shall be RMB¥ 2,059,000, representing 29% shares of the registered capital.

 

 

4

 

 

Party C’s contribution to the registered capital shall be RMB¥ 710,000, representing 10% shares of the registered capital; 

 

Party D’s contribution to the registered capital shall be RMB¥ 710,000, representing 10% shares of the registered capital.

 

The Parties agree to pay their respectively contribution within 3 months following the issuance of the business license of the Company by competent registration authority.

 

4.4 Assignment of Registered Capital 

 

(a) If a Party (the "Assigning Party") proposes to transfer all or any part of its interest in the registered capital of the Company to a third party, the other Parties shall have a pre-emptive right to purchase such interest at the price offered to the third party. The Assigning Party shall notify the other Parties in writing of the terms and conditions of the proposed transfer. If the other Parties does not exercise its pre-emptive right of purchase within thirty (30) days after delivery of such notice, such other Parties shall be deemed to have consented to such transfer and covenants that it will sign all necessary documents in connection therewith and will cause the directors appointed by it to attend in person, by proxy or by telecommunications any Board meeting at which such transfer is to be considered and to vote in favor of a resolution approving such transfer or to sign a written resolution circulated in lieu of such a meeting of the Board, as the case may be. 

 

(b) Notwithstanding clause (a) of this Article above, the Party A may transfer all or part of its shares of the Company to any Affiliate of Party A. The Affiliate means any company which, directly or indirectly, in control of, or be controlled by, or under common control with, Party A. In respect of any transfer pursuant to this clause, the other Parties hereby waive their pre-emptive right, waive notice in accordance with clause (a) of this article above, irrevocably consent to such transfer, covenant that it will sign, and cause the directors appointed by it to sign, all the necessary documentations in connection with the approval and registration procedures under PRC laws.

 

4.5 Increase or Reduction of Registered Capital 

 

Any increase or reduction in the registered capital of the Company must be (i) approved by a unanimous vote of the members of the Board present at a meeting or by unanimous written resolution and (ii) submitted to the Examination and Approval Authority for approval. Upon such approval, the Company shall register the increase or reduction with the registration authority. 

 

5. RESPONSIBILITIES OF THE PARTIES 

 

5.1 Responsibilities of Party A 

 

 

5

 

 

Party A shall have the following responsibilities: 

  

 

	 	(a)	
make its contribution to the registered capital of the Company as provided in Article 4.3 hereof.

	 	 	 
	 	(b) 	
promptly following the Business License Issuance Date, sign and perform all the contracts to which it is a party;

	 	 	 
	 	(c)	
handle other matters entrusted to it pursuant to separate written agreement entered into by the Company and Party A from time to time;

	 	 	 
	
 
	
(d)
	
If any Party other than Party A pays any creditors of the Company due to a guarantee to such creditors in favor of the Company according to 5.2 (f), 5.3(e) or 5.4(e), Party A shall reimburse such Party for its proportionate share of the amount paid by such Party, but only if the Company’s borrowing of such funds and such Party’s guaranty of the Company’s obligations have been expressly agreed to in advance by Party A in writing or in a Board resolution, for which all Party A-nominated directors have voted affirmatively.

 

 

5.2 Responsibilities of Party B 

Party B shall have the following responsibilities: 

 
	 	(a)	be responsible for the obtaining of the relevant Permits, and approvals and registrations required in respect of other documentations needed by the registration;

 

	 	(b) 	assist in obtaining amendments to, or renewals of, any of the Permits as required by the Business from time to time;

 

	 	(c) 	
make its contribution to the registered capital of the Company as provided in Article 4.3 hereof.

 

	 	(d)	promptly following the Business License Issuance Date, sign and perform all the contracts to which it is a party;

 

	 	(e)	handle other matters entrusted to it pursuant to separate written agreement entered into by the Company and Party A from time to time.

 

	 	(f) 	provide shareholder loan (or loan from the third party and be guaranteed by Party B) to the Company as the operating funds, following the instruction of the Board of Directions of the Company.

 

 

6

 

 

	 	(g)	supply offices and facilities for current staff of the Company.

 

	 	(h)	shall transfer its related business estimated at RMB 11 million to the Company.

    

5.3 Responsibilities of Party C 

Party C shall have the following responsibilities: 

 
	 	(a) 	assist in obtaining amendments to, or renewals of, any of the Permits as required by the Business from time to time;
	 	 	 
	 	(b)	make its contribution to the registered capital of the Company as provided in Article 4.3 hereof;
	 	 	 
	 	(c) 	promptly following the Business License Issuance Date, sign and perform all the contracts to which it is a party;
	 	 	 
	 	(d)	handle other matters entrusted to it pursuant to separate written agreement entered into by the Company and Party A from time to time; and
	 	 	 
	 	(e)	provide shareholder loan (or loan from the third party and be guaranteed by Party C) to the Company as the operating funds, following the instruction of the Board of Directions of the Company.

 

5.4 Responsibilities of Party D 

Party D shall have the following responsibilities: 

 
	 	(a) 	assist in obtaining amendments to, or renewals of, any of the Permits as required by the Business from time to time;
	 	 	 
	 	(b) 	make its contribution to the registered capital of the Company as provided in Article 4.3 hereof;
	 	 	 
	 	(c)	promptly following the Business License Issuance Date, sign and perform all the contracts to which it is a party;
	 	 	 
	 	(d) 	handle other matters entrusted to it pursuant to separate written agreement entered into by the Company and Party D from time to time; and
	 	 	 
	 	(e) 	
provide shareholder loan (or loan from the third party and be guaranteed by Party D) to the Company as the operating funds, following the instruction of the Board of Directions of the Company.

 

 

7

 

   

6. BOARD OF DIRECTORS 

 

6.1 Formation of the Board 

 

	
 
	
(a)
	
The Board shall be formed on the date the business license is issued. 

 

	
 
	
(b)
	
The Board shall consist of five (5) directors, three (3) of whom shall be appointed by Party A, one (1) of whom shall be appointed by Party B, and one (1) of whom shall be appointed by Party C and Party D jointly. 

 

	
 
	
(c)
	
Each director shall be appointed for a term of three (3) years and may serve consecutive terms if re-appointed by the Party originally appointing him/her. A director shall serve and may be removed at the pleasure of the Party that appointed him/her. If a seat on the Board is vacated by the retirement, resignation, illness, disability or death of a director or by the removal of such director by the Party which originally appointed him, the Party which originally appointed such director shall appoint a successor to serve out such director's term. 

 

	
 
	
(d)
	
The Chairman of the Board of Directors (“Chairman”) shall be elected from the Directors by the mutual consultation of both Parties. The Chairman shall be the legal representative of the Company. Whenever the Chairman is unable to perform his responsibilities for any reason, the Chairman shall designate another director to perform his responsibilities temporarily in accordance with this Contract and the Articles of Association. 

 

	
 
	
(e)
	
The Party appointing a director shall submit written notice of his appointment or removal to the other Parties. 

 

	
 
	
(f)
	
Each director shall bear fiduciary responsibilities to the Company in accordance with applicable Laws and ethical policies as the Board may adopt. The directors shall serve without remuneration, but all reasonable costs, such as round-trip airplane tickets and reasonable accommodation incurred by the directors in the performance of duties assigned by the Board shall be borne by the Company in accordance with such policies and guidelines as the Board may adopt from time to time. 

 

	
 
	
(h)
	
No director shall bear any personal liability for any acts performed in good faith in his/her capacity as a director or as assigned by the Board, except for willful misconduct, and/or acts in violation of applicable laws or applicable ethical rules. Subject to the foregoing, the Company shall indemnify each director against any claims that may be brought against such director for acts performed in his capacity as a director of the Company. 

 

 

8

 

 

6.2 Powers of the Board 

 

	
 
	
(a)
	
The Board shall be the highest authority of the Company. 

 

	
 
	
(b)
	
Adoption of resolutions relating to the following matters shall require the unanimous affirmative vote of each and every director of the Board present in person, by proxy or by telecommunications at a duly convened meeting of the Board: 

 

	
 
	
(i)
	
the amendment of this Contract and the Articles of Association; 

 

	
 
	
(ii)
	
the merger of the Company with another legal entity or organization, or the investment of capital or assets by the Company in another legal entity or organization; 

 

	
 
	
(iii)
	
the termination or dissolution of the Company and resulting liquidation thereof; 

 

	
 
	
(iv)
	
the increase, reduction or assignment of the registered capital of the Company; 

 

	
 
	
(c)
	
The following matters of the Board of Directors meeting shall require the affirmative vote of a simple majority of the directors present in person, by proxy or by telecommunications at a duly convened meeting of the Board :

 

	
 
	
(i)
	
the execution by the Company of any contract with a Party or an subsidiary/affiliate or a shareholder/director of such Party; 

 

	
 
	
(ii)
	
adoption or amendment of the annual budgets and business plan;

 

	
 
	
(iii)
	
any investment or commitment of Company in amounts individually in excess of $50,000 USD or in the aggregate in excess of $100,000 USD;

 

	
 
	
(iv)
	
any loan or credit taken by the Company, or the repayment of the debt owed by the Company;

 

	
 
	(v)	
initiating or settling any litigation, arbitration or other formal dispute settlement procedures or forgiveness of any obligation owed to the Company in excess of $25,000 USD ;

 

	
 
	
(vi)
	
approval of annual closing of the books of the Company and the Company’s annual financial statements, and changing of accounting policies and practices or the Company’s accounting periods

 

	
 
	
(vii)
	
adoption or any material modification of major regulations or procedures, including any employee rules or handbook;

 

 

9

 

 

	
 
	
(viii)
	
establishment or amendment to the condition of employment of the Company officers;

 

	
 
	
(ix)
	
sale or disposition of or granting a lien, security interest or similar obligation with respect to, in one or a series of related transactions of the Company or with respect to any major strategic asset of the Company that crucial to the Company’ business;

 

	
 
	
(x)
	
formation of any subsidiary of the Company;

 

	
 
	
(xi)
	
entering into any agreement or commitment to provide goods or services outside China.

 

	
 
	
(d)
	
Adoption of resolutions relating to the other matters of the Company other than stipulated by 6.2 (b) and (c) shall require the affirmative vote of a simple majority of all the directors.

 

6.3 Meetings 

 

	
 
	
(a)
	
Board meetings shall be held quarterly subject to always holding at least four (4) meetings in each calendar year. Meetings generally shall be held at the legal address of the Company or such other address in China or abroad as is designated by the Board. 

 

	
 
	
(b)
	
An interim Board meeting shall be scheduled upon the written request of 1/3 of total number of directors or more of the directors of the Company. 

 

	
 
	
(c)
	
In extraordinary circumstances requiring immediate action by the Board and otherwise as provided in this Contract, the Chairman may call an emergency meeting of the Board. The secretary, under the direction of the Chairman shall give each director at least twenty-four (24) hours written notice in advance of such emergency meeting, specifying the date, time and place of such emergency Board meeting. Such written notice shall be accompanied by an agenda and such additional materials as the Chairman deem appropriate. 

 

	
 
	
(d)
	
The Chairman shall be responsible for convening and presiding over regular, interim and emergency Board meetings. Board meetings may be attended by directors in person, by proxy or by telecommunications. 4/5 of total number of directors present in person, proxy or by telecommunications shall constitute a quorum necessary for the conduct of business at a meeting of the Board. 

 

 

10

 

 

	
 
	
(e)
	
If a Board member is unable to participate in a Board meeting in person or by telecommunications, he/she may issue a written proxy and entrust a representative to participate in the meeting on his/her behalf. The representative so entrusted shall have the same rights and powers as the Board member, including the right to be counted in the quorum, to vote on any resolution and to sign relevant documents. Such representative shall present such written proxy to the Secretary prior to the start of the Board meeting, and the secretary shall attach such proxy to the minutes of the Board meeting. 

 

	
 
	
(f)
	
Board meetings shall be conducted in English and Chinese. 

 

	
 
	
(j)
	
The secretary shall prepare and complete accurate minutes of each Board meeting in accordance with the provisions of this Contract and the Articles of Association. Such minutes shall be in both English and Chinese. The secretary shall be responsible for maintaining the Company’s minute book. 

 

 

7. OPERATION AND MANAGEMENT 

 

7.1 Management System. The Company shall adopt a management system under which the general manager shall report to and work under the supervision and direction of the Board. 

 

7.2 Management Personnel

 

The general manager of the Company shall be individuals of high integrity with appropriate professional qualifications and experience. The appointment of the general manager of the Company shall be mutual agreed by the Parties. The chief financial official of the Company shall be nominated by Party A.

 

7.3 Employment of Management Personnel 

 

Management Personnel shall be employed by the Company in accordance with the terms of individual employment contracts entered into between the Management Personnel and the Company and approved by the Board. The Management Personnel may be rewarded, disciplined or removed by the Board. If any of the Management Personnel is removed by the Board, the replacement shall be nominated by the original nominating Party in accordance with Article 7.2 above. 

 

 

11

 

 

7.4 General Manager Duties 

 

The general manager shall be responsible for all of the day-to-day operations and management of the Company other than those matters expressly reserved for decision and action by the Board as set out in Articles 6.2(b) and (c) above. He shall be responsible to the Board and shall carry out all matters under the authority granted to him by the Board. The general manager shall have the authority at his sole discretion to hire and dismiss all employees of the Company other than the other Management Personnel. The general manager shall have the power to decide the internal operational structure of the Company. He shall appoint department managers as appropriate to be responsible for the work of their respective departments. The other Management Personnel and such department managers shall report to and work under the supervision and direction of the General Manager.

 

7.5 Supervisor

 

	
 
	
(a)
	
The Company shall have a Supervisor who is mutual appointed by the Parties. The term of the Supervisor shall be three (3) years, and the Supervisor may continue to serve his post upon expiration if re-appointed by the Parties. 

 

	
 
	
(b)
	
The supervisor shall exercise the following authorities: 

 

	
 
	
(i)
	
Reviewing the financial affairs of the Company;

 

	
 
	
(ii)
	
Exercise supervision over the acts of the directors and senior officers for the performance of their corporate functions, which violate laws, administrative regulations or the Articles of Association of the Company;

 

	
 
	
(iii)
	
Demand remedy from a director(s) or senior officer(s) when any act thereof causes harm to Company interests, and file a lawsuit when the remedy was not made by those director(s) or senior officer(s);

 

	
 
	
(iv)
	
Propose the interim Board meetings when the Board of Directors fail to perform their duties to convene and preside the regular Board meetings;

 

	
 
	
(v)
	
Submit proposals at the Board meetings.

 

 

8. NON-COMPETITION 

 

	
8.1
	
During the lifetime of this Agreement and two years after the termination of this Agreement, no Party to this Agreement shall without the prior consent of the other Parties, engage in, whether directly or indirectly, Merchandising Services (as defined in the License Agreement) or any other business that is competitive with Company in territory of mainland China. 

 

	
8.2
	

In the event that Party A enters into a contract with a customer that covers more than one country and the scope of such agreement includes services in Territory, Party A shall not be prohibited from entering into or performing such agreement, provided that Party A shall make commercially reasonable efforts to enable Company to participate in and be fairly compensated for providing services to any such customer.

 

 

12

 

 

	
8.3
	
Party A and Party B will allow the other Parties to this Agreement a period agreed by Party A and Party B to execute and perform the agreements and commitment that have been signed and promised before the Contract. 

 

 

9. LABOUR MANAGEMENT 

 

9.1 Company Staff 

 

Matters relating to the recruitment, employment, dismissal, resignation, wages and welfare of, and other matters concerning, the staff and workers of the Company shall be determined autonomously by the Company without outside interference, in accordance with Applicable Laws and the policies adopted by the Company from time to time. 

 

9.2 Labour Union 

 

Working Personnel shall have the right to establish a Labour Union in accordance with Applicable Laws. Working Personnel shall be employed by the Company in accordance with the terms of a collective labour contract or individual labour contracts entered into between the Company and the Working Personnel. 

 

9.3 Labour Protection 

 

The Company shall conform to the Applicable Laws of China concerning labour protection and ensure safe and civilized operation. Labour and social insurance for the Working Personnel of the Company shall be handled in accordance with Applicable Laws. 

 

 

10. FINANCIAL AFFAIRS AND ACCOUNTING 

 

10.1 Accounting System 

 

	
 
	
(a)
	
The chief financial officer of the Company, under the leadership of the general manager, shall be responsible for the financial management of the Company. 

 

	
 
	
(b)
	
The chief financial officer shall prepare the accounting system and procedures in accordance with US GAAP and for local compliance the Enterprise Accounting System and supplementary stipulations promulgated by the Ministry of Finance. The accounting system and procedures to be adopted by the Company shall be submitted to the Board for approval. Once approved by the Board, the accounting system and procedures shall be filed with the department in charge of the Company and with the relevant local department of finance and the tax authorities for the record. The debit and credit method, as well as the accrual basis of accounting, shall be adopted as the methods and principles for keeping accounts. 

 

 

13

 

 

	
 
	
(c)
	
The Company shall adopt Renminbi as its bookkeeping base currency, but may also adopt [United States Dollars] or other foreign currencies as supplementary bookkeeping currencies. 

 

	
 
	
(d)
	
All accounting records, vouchers, books and statements of the Company shall be made and kept in Chinese and English. 

 

	
 
	
(e)
	
For the purposes of preparing the Company's accounts and statements, calculation of declared dividends to be distributed to the Parties, and for any other purposes where it may be necessary to effect a currency conversion, such conversion shall be in accordance with the posted exchange rate, as determined by the median rate for buying and selling announced by the People's Bank of China or other legally recognized rate on the date of actual receipt or payment. 

 

10.2 Auditing 

 

	
 
	
(a)
	
The Company’s independent auditor shall be engaged by the Company as its auditor to examine and verify the annual financial report. The Company’s independent auditor shall be appointed by the Board. 

 

	
 
	
(b)
	
Quarterly financial statements and annual financial statements and other reports shall be prepared and submitted to the Board. Such statements shall be in both Chinese and English and shall reference both RMB and United States Dollars. The annual financial statements be prepared consistent with U.S. GAAP and will include the following statements (including footnotes): 

 

	
 
	
(i)
	
balance sheet; 

 

	
 
	
(ii)
	
profit and loss statement; 

 

	
 
	
(iii)
	
cashflow statement; 

 

	
 
	
(iv)
	
statement of changes in financial position; and 

 

	
 
	
(c)
	
The quarterly financial statements shall be presented to the general manager and the Board in sufficient time for the Board to approve them and then for the General Manager to arrange for their filing with the proper authorities. The annual financial statements shall be audited and presented to the general manager and the Board within the first two (2) months of the succeeding year for approval by the Board. The annual financial statements shall be certified by the Independent Auditor. The general manager shall file the certified annual financial statements with the proper authorities prior to the expiration of the fourth month of the succeeding year. 

 

 

14

 

 

	
 
	
(d)
	
Each Party may, at its own expense, appoint either the internal staff of such Party or an independent accountant (which may be either an accountant registered abroad or registered in China) to audit the books, accounts and other financial, commercial and legal records of the Company on behalf of such Party. Reasonable access to such records shall be given to such internal or independent auditor and such auditor shall keep confidential all documents under his auditing. 

 

10.3 Bank Accounts and Foreign Exchange Control 

 

The Company shall separately open a foreign exchange account and a Renminbi account at an authorized bank within China approved by the SAFE and, with the approval of SAFE, may open a bank account in the name of the Company outside China. The Company's foreign exchange transactions shall be handled in accordance with the Applicable Laws of China relating to foreign exchange control. 

 

10.4 Fiscal Year 

 

The Company shall adopt the calendar year as its fiscal year, which shall begin on January 1 and end on December 31 of the same year except that the first fiscal year of the Company shall commence on the Business License Issuance Date and shall end on the immediately succeeding December 31. 

 

10.5 Profit Distribution 

 

	
 
	
(a)
	
After the payment of income tax by the Company, the Board will determine the annual allocation to the reserve fund and expansion fund of the Company and the bonus and welfare fund for the workers and the staff from the after-tax net profits. 

 

	
 
	
(b)
	
The after-tax net profit of the Company (after the deduction of the allocations to the funds mentioned in clause (a) above) shall be distributed to the Parties in proportion to their respective interests in the registered capital unless the Board determines that such profits should be reinvested in the Company. If for any reason Party A’s share of the Company’s after-tax net profits for any period cannot be remitted to Party A outside of China in [United States dollars] or any other foreign currency acceptable to Party A, then the Company shall not make any distribution of profits to the other Parties for such period until such time as such Party A profit share can be so remitted. 

 

	
 
	
(c)
	
If the Company is carrying forward losses from any previous years, the profit of the current year shall first be used to cover the losses. No profit shall be distributed unless the cumulative deficit from the previous years is made up. The profit retained by the Company and carried over from the previous years may be distributed together with the distributable profit of the current year, or after the deficit of the current year is made up therefrom. 

 

 

15

 

 

11. TAXATION AND INSURANCE 

 

The Company shall pay tax under the Applicable Laws of China relating to taxation. 

 

 

12. SOFTWARE LICENSE

 

12.1 Party A hereby agrees to grant to the Company a non-transferable license to use the Licensed Technology (as defined in SCHEDULE1) in the territory to P. R. China. The Licensed Technology does not confer to the Company any right to review, modify or copy the original software. The sole permitted use of the Licensed Technology shall be operating a merchandising service in P. R. China.

 

12.2 Party A shall have the right to revoke The Licensed Technology immediately because of the following matters:

 

	
 
	
(a)
	
This Contract is terminated according to Article 14.1 ; or

 

	
 
	
(b)
	
the other Party or Parties breaches this Contract and fails to cure such breaching within 30 days upon the receipt of the written notice from Party A.

 

12.3 As the consequence of the termination, the parties agree hereto:

 

	
 
	
(a)
	
The Company shall have no further rights with respect to the Licensed Technology;

 

	
 
	
(b)
	
All accrued and unpaid fees and any other costs or expenses owing by either party to the other shall become due and payable; and

 

	
 
	
(c)
	
The Company shall return to Party A all the tangible media and copies thereof embodying any Licensed Technology and delete all copies of the Licensed Technology on Company system or otherwise stored digitally.

 

13.THE JOINT VENTURE TERM 

 

13.1 Joint Venture Term 

 

The joint venture term of the Company (“Term”) shall be 30 years, commencing on the Business License Issuance Date. 

 

 

16

 

 

13.2 Extension 

 

If the Board unanimously approves the extension of the Term, the Company shall submit an application to the Examination and Approval Authority for approval no less than six (6) months prior to the expiry of the Term.

 

 

14. TERMINATION, DISSOLUTION, BUYOUT AND LIQUIDATION 

 

14.1 Termination 

 

	
 
	
(a)
	
This Contract shall terminate upon the expiration of the Term unless extended pursuant to Article 13.2. 

 

	
 
	
(b)
	
This Contract may be terminated at any time prior to expiration of the Term by the mutual written agreement of the Parties. 

 

	
 
	
(c)
	
A Party ("Notifying Party") may notify the other Parties in writing at any time prior to the expiration of the Term that it desires to terminate this Contract if: 

 

	
 
	
(i)
	
the other Party or Parties materially breaches this Contract or materially violates the Articles of Association, and such breach or violation is not cured within sixty (60) days of the Notifying Party's giving written notice of such breach to the breaching Party; or 

 

	
 
	
(ii)
	
the other Party materially breaches any ancillary contract to which it is a party, and such breach is not cured within the applicable cure period thereunder, or any ancillary contract is terminated or becomes or is declared void or unenforceable for any reason (other than any reason attributable to the Notifying Party), which has (in each case) a material adverse effect on the business, assets or operations of the Company; or 

 

	
 
	
(iii)
	
the other Party becomes bankrupt or insolvent, or is the subject of proceedings for liquidation or dissolution, or ceases to carry on business or becomes unable to pay its debts as they come due; or 

 

	
 
	
(iv)
	
the Company becomes bankrupt or insolvent, or is the subject of proceedings for liquidation or dissolution, or ceases to carry on business or becomes unable to pay its debts as they come due; or 

 

	
 
	
(v)
	
any permit on the establishment of the Company is not issued by the relevant government department within [90] days of application; or

 

	
 
	
(vi)
	
a material modification is made at any time by any government authority to this Contract, the Articles of Association, the Approval Letter, the Approval Certificate, the business scope set out in the Business License, any ancillary contract, any Additional Permit and it cannot be resolved to the satisfaction of the Party concerned within [sixty (60)] days of the issue of the relevant document containing or imposing the material modification; or

 

 

17

 

 

	
 
	
(vii)
	
the conditions or consequences of Force Majeure (as hereinafter defined) have a material adverse effect on the business, assets or operations of the Company and continue for a period in excess of six (6) months and the Parties have been unable to find an equitable solution pursuant to Article 17.2(c) hereof; or

 

Upon the occurrence of any of the foregoing events, in addition to its other rights under this Article 14.1(c) or Article 15 or under applicable laws, a Party entitled to give notice of intent to terminate this Contract shall have the right to suspend performance of its obligations under this Contract until such time as such event is resolved. 

 

14.2 Notification and Termination Procedure 

 

	
 
	
(a)
	
In the event that the Notifying Party gives written notice of a desire to terminate this Contract pursuant to Article 14.1(c) above, the Parties shall conduct negotiations for a thirty (30) day period after such notice is given in an effort to resolve the situation which resulted in the giving of such notice. In the event such matters are not resolved to the satisfaction of the Parties within such [thirty (30)] day period, or such longer period as the Parties may agree in writing, the Notifying Party shall have the right by written notice to the other Party to declare this Contract terminated;

 

	
 
	
(b)
	
Upon the receipt by the other Party of the written notice about termination, the Company shall be dissolved and liquidated in accordance with the relevant procedures under applicable laws.

 

15. BREACH OF CONTRACT 

 

	
15.1
	
Remedies for Breach of Contract Except as otherwise provided herein, if a Party ("breaching Party") fails to perform any of its material obligations under this Contact or otherwise is in material breach of this Contract, then the other Party (“aggrieved Party”) may: 

 

	
 
	
(a)
	
give written notice to the breaching Party describing the nature and scope of the breach and demanding that the breaching Party cure the breach at its cost within a reasonable time specified in the notice ("Cure Period"); and 

 

	
 
	
(b)
	
if the breaching party fails to cure the breach within the Cure Period (or, if there is none, at any time following such breach), then in addition to its other rights under Article 14.1(c)(i) or applicable Laws, the aggrieved Party may claim direct and foreseeable damages arising from the breach. 

 

 

18

 

 

16. CONFIDENTIALITY 

 

The Parties 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 party without the prior written consent of the other 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.

 

17. FORCE MAJEURE 

 

17.1 Definition of Force Majeure 

 

"Force Majeure" shall mean all events which are beyond the control of the Parties to this Contract, and which are unforeseen, unavoidable and insurmountable, and which prevent total or partial performance by either of the Parties. Such events shall include earthquakes, typhoons, epidemic, flood, fire, war, strikes, riots, acts of governments, changes in law or the application thereof or any other instances which cannot be foreseen, prevented or controlled, including instances which are accepted as Force Majeure in general international commercial practice. 

 

17.2 Consequences of Force Majeure 

 

	
 
	
(a)
	
If an event of Force Majeure occurs, a Party's contractual obligations affected by such an event under this Contract shall be suspended during the period of delay caused by the Force Majeure and shall be automatically extended, without penalty or liability, for a period equal to such suspension. 

 

	
 
	
(b)
	
The Party claiming Force Majeure shall promptly inform the other Parties in writing and shall furnish within [fifteen (15)] days thereafter sufficient proof of the occurrence and duration of such Force Majeure. The Party claiming Force Majeure shall also use all reasonable endeavours to terminate the Force Majeure. 

 

	
 
	
(c)
	
In the event of Force Majeure, the Parties shall immediately consult with each other in order to find an equitable solution and shall use all reasonable endeavours to minimize the consequences of such Force Majeure. 

 

 

19

 

 

18. SETTLEMENT OF DISPUTES 

 

18.1 Friendly Consultations 

 

In the event of any dispute, controversy or claim arising out of or relating to this Contract, or the breach, termination or invalidity hereof ("dispute"), the Parties shall attempt in the first instance to resolve such dispute through friendly consultations. 

 

18.2 Arbitration 

 

	
 
	
(a)
	
In the event such dispute is not resolved through consultations within [sixty (60)] days after the date such consultations were first requested in writing by a Party, then any Party may submit the dispute for arbitration in Shanghai before the China International Economic and Trade Arbitration Commission ("CIETAC") in accordance with CIETAC Arbitration Rules ("Arbitration Rules"). 

 

	
 
	
(b)
	
The arbitration tribunal shall consist of three arbitrators, one appointed by the applicant Party, one appointed by the other Parties and, if either of the Parties fails to appoint an arbitrator within the time specified in the Arbitration Rules, the Chairman of CIETAC shall make such appointment.

 

	
 
	
(c)
	
A third arbitrator (the "Presiding Arbitrator") shall be jointly appointed by agreement between the Parties, and, if the Parties fail to jointly appoint the Presiding Arbitrator within the time specified in the Arbitration Rules, the Chairman of CIETAC shall make such appointment. 

 

	
 
	
(d)
	
The arbitration proceedings shall be conducted in the English language. 

 

	
 
	
(e)
	
All costs of arbitration (including but not limited to arbitration fees, costs of arbitrators and legal fees and disbursements) shall be borne by the losing party, unless otherwise determined by the arbitration tribunal. 

 

19. MISCELLANEOUS PROVISIONS 

 

19.1 Notices 

 

	
 
	
(a)
	
Any notice or written communication provided for in this Contract by either Party to the other, including but not limited to any and all offers, writings, or notices to be given hereunder, shall be made in Chinese and English either: 

 

	
 
	
(i)
	
by hand; or 

 

	
 
	
(ii)
	
by courier service delivered letter; or 

 

	
 
	
(iii)
	
by facsimile. 

 

 

20

 

 

	
 
	
(b)
	
Notices shall be deemed to have been delivered at the following times: 

 

	
 
	
(i)
	
if by hand, on reaching the designated address and subject to return receipt or other proof of delivery; 

  

	
 
	
(ii)
	
if by courier, the [fifth] Business Day after the date of dispatch; and 

 

	
 
	
(iii)
	
if by fax, upon the next Business Day following the date marked on the confirmation of transmission report by the sender's fax machine, indicating completed uninterrupted transmission to the relevant facsimile number. 

 

(c) During the Term, each Party may change its particulars for receipt of notices at any time by notice given to the other Party in accordance with this Article 15.1. 

 

Party A: 

 

[mailing address] : Room 3903, Tower 2, Lippo Centre, 89, Queensway Central, Hong Kong 

 

Facsimile No: (852) 2523 5173

 

Attention: Cliff Wong and Patricia Franco, President – International Division

 

Party B: 

 

[mailing address] : Office: Floor 3, Building C, No. 602, Zhoujiazui Rd, Hongkou District, Shanghai, P.R.China 

 

Facsimile No: (8621) 6211 5098

 

Attention: James Qian

 

Party C:

[mailing address]: Office: Suite 1103 No. 849 Wan Hang Du Road, Shanghai, PRC

 

Facsimile No.: (8621) -62315097

 

Attention: Ma Hong

 

Party D: 

[mailing address]: Office: 34 Craigmore Drive, Kellyville, NSW 2155 Australia 

 

Facsimile No.: (00612)88243168

 

Attention: 

 

 

21

 

 

19.2 Severability 

 

The invalidity of any provision of this Contract shall not affect the validity of any other provision of this Contract. 

 

19.3 Waiver 

 

Either Party's failure to exercise or delay in exercising any right, power or privilege under this Contract shall not operate as a waiver thereof, and any single or partial exercise of any right, power or privilege shall not preclude the exercise of any other right, power or privilege. 

 

19.4 Costs 

Save as otherwise provided in this Contract, each Party shall bear its own legal and other professional costs in relation to the preparation, negotiation and entry into of this Contract. 

 

19.5 Schedules and Annexes 

 

The Schedules and Annexes hereto are made an integral part of this Contract and are equally binding with the main body of the Contract. In the event of any conflict between the terms and provisions of the main body of the Contract and the Schedules or Annexes, the terms and provisions of the main body of this Contract shall prevail. 

 

19.6 Language 

 

This Contract is executed in the Chinese language in six (6) originals and in the English language in six (6) originals. Each Party holds one Chinese original and English original, the Company holds one Chinese original and English original, and one Chinese original and English original will be provided to the approval authority. Both language versions shall be equally authentic. 

 

 

IN WITNESS WHEREOF, each of the Parties hereto has caused this Contract to be executed by its duly authorized representative on the date first set forth above in [●], People's Republic of China. 

 

	
Party A:     
	
Party B:

	
 
	
 

	
 
	
 

	
By: ____________________   
	
By: ____________________ 

	
 
	
 

	
 
	
 

	
Title: [Party A rep position]     
	
Title: [Party B rep position] 

	
 
	
 

	
 
	
 

	
Nationality:                    :
	
[Party B rep nationality]

	 	 
	 	 
	 	 
	Party C:    	Party D:
	 	 
	 	 
	By:	By: 
	 	 
	 	 
	 	 
	Title:     	 
	Nationality:                  :	 

 

 

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