Attached files
| file | filename |
|---|---|
| S-1/A - VLOV INC. | v195194_s1a.htm |
| EX-5.1 - VLOV INC. | v195194_ex5-1.htm |
| EX-23.1 - VLOV INC. | v195194_ex23-1.htm |
| EX-23.3 - VLOV INC. | v195194_ex23-3.htm |
Exhibit
10.12
Bridge
Loan and Financing Agreement
This
Bridge Financing Agreement (the “Agreement”) is related to
funding provided by Pope Asset, Ancora Greater China Fund, LP and MMH Group LLC.
(collectively, “Investors”) that will be
utilized to complete the pre-reverse merger activities for Korea Jinduren
International Fashion Co. Ltd. (“vLov”), a Chinese company
based at No. 1 Building, West Xiangjiang Road, Shishi City, Fujian Province,
China which designs, manufactures, markets and sells branded contemporary
fashion clothing and accessories to the 15-34 age group (30% of the PRC
Population) through 650 points of sale which are located at retail
and department stores throughout the PRC. vLov shall proceed through
the process of reverse merger (“RTO”) to be listed as a public
company in the United States and to close a financing at the same time in the
minimum amount of $6,000,000 (the “Financing;” collectively with
the RTO, referred to herein as the “APO”).
A. Parties to this
Agreement:
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(1)
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Investors will
provide a bridge loan of US$550,000 towards covering the costs for
pre-auditing, U.S. auditing, China legal, US legal and other necessary
professional fees for vLov to complete the reverse merger process to
obtain public status in the US.
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(2)
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The
investors and their affiliates, have experience and knowledge in the
reverse merger process. The Company’s advisors shall manage,
the entire process including but not limited to, auditing, legal, roadshow
coordination, etc. necessary for vLov to become a public company in the
U.S. Investors will provide, but are not obligated to provide
assistance in this process.
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B. Obligations:
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(1)
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Investors
shall provide a bridge Loan of US$550,000 to be held in an
escrow established by the Company’s US legal firm, Richardson Patel
(“Richardson Patel
LLP”) to cover the
following:
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(a)
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Engagement
and payment through escrow to a Chinese accounting and legal firm, to
perform the required pre-audit and the legal due diligence, setting up the
off-shore structure, etc. for vLov.
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(b)
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Engagement
of and payment through escrow to a U.S. auditing firm (“Moore Stephens”) and
Richardson Patel, which are necessary to complete an SEC-approved audit
and the required reverse merger of vLov.
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(c)
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Investors
will have the right of first refusal to provide the capital for the
Financing. The specifics of the Financing proposal by the Investors will
be clearly delineated in a separate Letter of Intent or Term Sheet which
will be presented to the Company; provided, however, that the minimum
pre-money valuation for the Financing is US$52.5M (based on 7X
2007 Net Profits of US$7.5M).
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(d)
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The
investors shall provide a public shell company quoted on the OTC Bulletin
Board suitable for the RTO that is acceptable to the vLov.
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(e)
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Any
extra payments beyond $550,000 that are deemed necessary to complete the
reverse merger process for vLov, not including any cash component
necessary to acquire the shell, will be negotiated in good faith with vLov
directly and payment for such services being made at the time the
RTO/Funding is completed and as a portion for a use of
proceeds.
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(2)
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The
Company’s Financial Advisor/Consultant and the Company (where
necessitated) shall provide the
following:
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(a)
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Assisting
and managing the process so Investors can complete further due diligence
of vLov.
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(b)
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Engagement
with Richardson Patel LLP to set up the escrow account and manage the
payment from the escrow account to various professionals engaged to
perform the necessary services required for the reverse
merger.
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(c)
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Coordinating
between Investors, consultants and vLov, in addition to investment bankers
(only if necessary), to ensure a smooth completion of the reverse merger
and funding process for vLov.
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C. Terms:
Commitment. Within seven (7)
business days after all parties execute this Agreement, Investors, on a prorata
basis, shall transfer US$250,000 of the required $550,000 to an escrow account
established by Richardson Patel LLP specifically for the use of payment to
designated service providers and consultants for vLov, as set forth on Schedule
A, attached hereto. Once the formal agreements between Richardson Patel and
Moore Stephens have been established and provided for review, the Investors will
contribute the additional $300,000 on a prorate basis, by wire no less than five
(5) business days to the escrow account.
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(1)
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Repayment of Bridge Loan and
Entitlement of Pubco shares. The parties agree that VLOV
shall have no obligation to repay the Bridge Loan prior to October 1,
2009, provided that VLOV shall be obligated to repay the Bridge Loan in
full on or after October 1, 2009 when the initial private (or public)
placement is completed. The Investors shall also receive stock of Pubco
(as defined below) upon the closing of the APO equal to 1.0% of the total
shares of common stock outstanding after the RTO, but before the
Financing, on a prorata basis per the ownership percentages in Schedule A
attached hereto. These shares issued to the Investors, or its
nominees, shall be initially restricted 144 shares. After the
completion of the Financing, vLov agrees to
register these shares in the registration statement to be filed under the
same terms as in the Financing Agreement. This agreement does not expire
until the shares are issued and the loan of $550,000 is returned to the
Investors, at which time all the obligations from both parties pursuant to
this Agreement shall be considered
fulfilled.
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(2)
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Provision of
Shell. The Investors shall provide a qualified merger
candidate that is a US public company quoted on the OTC Bulletin Board
(“Pubco”). The total consideration paid by vLov for Pubco will
be 4.0% of the total outstanding common shares of Pubco at the time of the
RTO (but before the issuance of stock to investors in the
Financing). No other cash consideration shall be paid by vLov
for Pubco. For avoidance of doubt, the 4.0% of the total
outstanding common shares of Pubco provided to the Investors shall be
proportioned to each Investor based upon the amount of funds contributed
by each Investor to obtain, acquire, etc. the Pubco divided by total cost
of Pubco. Additionally, each Investor has the right, but not
the obligation, to contribute their prorate share of the Pubco cost based
upon the ownership percentages outlined in Schedule
B.
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(3)
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Entire
contribution. US$550,000 is the entire contribution
obligation of the Investors, excluding any monies that the investors might
pay to acquire the public shell company. There shall be no additional
contribution from, nor refund to Investors regardless of the actual cost
situation.
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(4)
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Failure. In case the
reverse merger process is aborted at any time by the vLov side after
consummating this agreement, vLov shall refund all the costs spent up to
the time of termination back to the Investors and the balance of the
monies in the Escrow will also be forwarded back to the Investors. In
addition, any failure of the reverse merger process directly related to
changes in the overall Chinese law or regulations, the Company agrees to
reimburse the investors for the money spent through that point, including
all monies remaining in escrow. In both cases, no equity of any
kind shall be granted to the Investors and Investors shall have no
obligation of any kind to vLov.
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(5)
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Put Option. In the event
that the Chinese Government (or any agency) proceeds with an action
against or challenges specifically the vLov merger (not including an
overall blanket ruling) that adversely affects this proposed transaction
and vLov cannot cure such governmental action or otherwise address the
material adverse effect to the reasonable satisfaction of the Investors,
vLov shall promptly pay to the Investors, an amount equal to the monies
loaned up to that point, including any monies left in escrow.
Additionally, if the auditor or legal counsel resigned due to a dispute
with vLov and another firm can not be retained due to Company’s
shortcomings, Investors would be paid back all money loaned up to that
point.
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(6)
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Make Whole. To the
extent that vLov’s audited 2007 Net Income falls below $7.0 million US,
Investors’ equity position (on a pro-rata basis) at the time of the share
exchange will be adjusted proportionately to reflect such
shortfall. The Investors’ equity interest is to be adjusted
upward by the product of the formula: ($7.0 million/ Audited 2007 Net
Income) x current Investor ownership percentage (1.0%). For
avoidance of doubt, if the Company’s audited 2007 Net Income was $5
million, the Investment Group’s equity position (1.0%) in the Pubco
referenced above would be increased by 40% to 1.40% on a pro-rata basis.
Additionally, if the audited 2007 net income for vLov were to be less than
$3.5 million, the investors would at their option be able to recover all
monies loaned to date, including money in escrow and terminate this bridge
agreement.
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(7)
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Indemnification and
Confidentiality. The parties shall provide standard indemnification
and defense for claims arising on the reverse merger and on the resulting
Pubco. All parties agree to abide by the standard confidentiality terms.
No portion of this Agreement, nor any info on vLov, Pubco or any project
related information shall be disclosed to any third
party.
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(8)
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Entire
Agreement. This Agreement, the Promissory Note and the
Escrow Agreement constitutes the entire agreement of the parties on the
bridge financing portion of the transations contemplated
hereby.
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(9)
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Participation Right. In
the event the APO closes, for a period of Twelve (12) months following the
execution of this agreement following the closing of the APO, vLov agrees
to give Investors, and
their nominees or affiliates, the right to participate on any type of debt
or equity securities issued or proposed to be issued by
Pubco (“Future Securities”)
in the same amount as such Investor invested in the Financing (if
any). The Investors and their nominees or affiliates, will have
the right, but not the obligation, to participate and invest up to the
same about such Investor invested in the Financing (if
any). This right to participate shall survive any termination
of this Agreement or repayment of the monies invested by the Investors
pursuant hereto for the full 12 month
term.
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(6)
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Execution of
Agreement. The parties may execute this Agreement
individually or in combination, in one or more counterparts, each of which
shall be an original and all of which will constitute one and the same
agreement. The parties hereby agree that an executed facsimile
copy of this Agreement may be transmitted to either party and be deemed an
original for purposes hereof.
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(7)
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Lock-Up Agreement.
Shares owned by senior management, their relatives, and affiliates will be
locked-up until twelve (12) months after the registration statement
associated with this transaction and the RTO is declared
effective.
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(8)
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Governing Law. This
agreement will be government under a binding arbitration agreement with
the State of New York, United States of
America.
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(9)
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Additional Actions. vLov
and the Investors agree that the closing of the RTO will have to be
concurrent with the closing of the Financing accepted by both vLov and
Investors and or other funding sources. vLov and the Investors also agree
that it will be necessary and appropriate to enter into other documents to
set forth the terms of the various steps of the RTO as contemplated by
this Agreement, including but not limited to, (i) a share exchange
agreement with the public shell; and (ii) a registration rights agreement;
and (iii) a securities purchase agreement, and the parties covenant and
agree to negotiate in good faith such additional agreements to contain
terms and provisions customary in transactions of such nature, and upon
agreement in good faith of such terms, to execute and deliver such
additional agreements. vLov agrees to retain Hayden
Communications International, Inc. to provide Investor Relations and
consulting services for the company under a one year agreement just prior
to the completing of the RTO.
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(10)
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Signatory. Mr. Qing Qing
Wu, Chairman, and as a majority shareholder, has full authority and board
approval to enter into this binding
agreement.
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Agreed to
and approved by:
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Pope
Asset Management, LLC, Manager of
Pope
Investments II LLC
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| By: | /s/ William P. Wells | June 11, 2008 | |
| William P. Wells, Managing Member | |||
| Ancora Greater China Fund, LP (Ancora) | |||
| By: | /s/ John Micklitsch | June 11, 2008 | |
| John Micklitsch, Managing Member | |||
| MMH Group, LLC | |||
| By: | /s/ Matthew Hayden | June 11, 2008 | |
| Matthew Hayden, President | |||
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Korea
Jinduren International Fashion Co. Ltd. (vLov)
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| By: | /s/ Qing Qing Wu | June 11, 2008 | |
| Qing Qing Wu, Chairman | |||
| Jinduren International Fashion Co. Ltd | |||
Schedule
A
List
of Investors and Ownership Percentages for Bridge Investment
| Investor | Amount | Ownership % |
| 1. Pope Investments II LLC | $400,000 | 72.73% |
| 2. Ancora Greater China Fund, LP (Ancora) | $150,000 | 27.27% |
| 3. MMH Group, LLC | $N/A | N/A |
| $550,000 | 100.00% |
Schedule
B
List
of Investors and Ownership Percentages for Shell Participation
| Investor | Amount | Ownership % |
| 1. Pope Investments II LLC | 58.2% | 58.2% |
| 2. Ancora Greater China Fund, LP (Ancora) | 21.8% | 21.8% |
| 3. MMH Group, LLC | 20.0% | 20.0% |
| 100.00% | 100.0% |