AGREEMENT FOR THE ORGANIZATION OF -EUROPE This Agreement is entered into as of , 1997, by and between a California corporation ("") and ("Shareholder") with reference to the following facts: A. is engaged in the business of designing, manufacturing and marketing apparel and related accessories; B. Shareholder is a resident of France, with experience in the marketing of apparel and related accessories in France and the European Community (the "EC"); C. and Shareholder (the "Shareholders") desire to form a corporation under the French Company Law to act as a licensee for the manufacture and marketing of apparel under 's trademarks and logos in the EC, pursuant to a License Agreement to be negotiated between such corporation and (the ALicense Agreement@); NOW, THEREFORE, in consideration of the mutual covenants and warranties contained herein, the parties agree as follows: 1. Organization of -Europe. 1.1. Within thirty days of the execution of this Agreement, Shareholder shall cause a corporation or similar entity to be formed under the French Company Law, to be named "-Europe" or such other name as the parties may agree ("-Europe"). Within ten days after the formation of -Europe, will contribute US$ to the capital of -Europe in exchange for 49% of the issued and outstanding capital stock thereof, and Shareholder shall contribute US$102,000 to - Europe in exchange for 51% of the capital stock thereof (the "Shares"). 1.2 The Board of Directors of -Europe shall consist of five persons, two of whom shall be designated by from time to time and three of whom shall be designated by Shareholder from time to time. Both parties agree to vote their shares and to take such further actions as may be necessary to elect such designees to the Board of Directors and to maintain them in office so long as both Shareholder and are shareholders of -Europe. 1.3 Each of the following corporate actions of -Europe shall require the written consent of the Shareholders: 1.3.1 Amendment of the organizational or charter documents; 1.3.2 Increase or decrease in the authorized capital; 1.3.3 Liquidation or dissolution; 1 1.3.4 Any merger or consolidation; 1.3.5 Any sale of a substantial portion of the assets; 1.3.6 Any issuance of shares or other equity securities; 1.3.7 Any borrowing; 1.3.8 Any change in the compensation payable to officers or directors; 1.3.9 Any payment to an officer, director or shareholder or affiliate of an officer, director or shareholder; or 1.3.10 Any transaction outside the ordinary course of business. 2. Option to Purchase Upon Termination of License Agreement. 2.1 Upon the termination or expiration of the License Agreement for any reason, shall have the option to purchase the Shares issued to Shareholder, on the terms and for the purchase price specified in Sections 4 and 5 below. 2.2 The option provided for in this section may be exercised at any time within 30 days of termination of this License Agreement. In the case of expiration of this License Agreement, this option shall be exercised by written notice at least 30 days prior to such expiration. 3. Option To Purchase Upon Certain Events. 3.1 In the event that (a) either Shareholder becomes bankrupt (as defined below); or (b) any other event occurs which, but for this Agreement, would result in the involuntary transfer of a Shareholder's Shares, by operation of law or otherwise (the "Option Events"), the other Shareholder (the "Optionee Shareholder") shall have the option to purchase all of the Shares owned by such Shareholder (the "Optionor Shareholder"), or its successor in interest, as set forth below. 3.2 Within thirty days after any Option Event, the Optionor Shareholder, or its successor in interest, shall give written notice of such event to the Optionee Shareholder. The purchase price of the Shares subject to the options provided in this Section 3 shall then be determined in accordance with Section 4 as soon as is reasonably feasible. 3.3 The Optionee Shareholder shall have the option to elect to purchase all or part of the Shares of the optionor Shareholder. Such option shall be exercisable during the sixty day period beginning with the delivery of the notice specified above, or if no notice is given, 2 beginning at the date independent confirmation is received by the Optionee Shareholder that an Option Event has occurred. 3.4 The price to be paid and the terms of payment for any purchase of Shares pursuant to this Section 3 shall be as set forth in Sections 4 and 5. 3.5 Unless the Optionee Shareholder shall have agreed to purchase all of the Shares of the Optionor Shareholder by the end of the option period specified herein, no Shares of the Optionor Shareholder may be purchased pursuant to this Section 3.
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