LOANOUT AGREEMENT
This
LOANOUT AGREEMENT (this “Agreement”), dated as of April 27, 2010 (the “Effective
Date”), by and between Worldwide Officers, Inc. a California Corporation having
its principal location of 0000 Xxxxxxxxxxx Xxxxx, Xxxxxxxxxx Xxxxx, Xxxxxxxxxx
00000 (“Lender”), and VLOV, Inc., a Nevada corporation having its principal
office at Room 11/F, Xiamen Guanyin Shan International Commercial Operation
Centre, A3-2 124, Xxxxx Bei Road, Siming District, Xiamen, Fujian Province,
People’s Republic of China (the “Company”), for
the services of Lender’s employee, Bennet P.
Tchaikovsky (the “Executive”). The Executive is made a party to this Agreement
solely for the purpose of acknowledging Section 4 hereof.
1. Engagement, Duties and
Acceptance.
1.1 Effective
as of the Effective Date, the Company engages Lender for, and Lender agrees to
supply and make available to the Company, the services of the Executive to serve
as the Company’s Chief Financial Officer (“CFO”) during the Term (as defined in
Section 3.1), on the terms and conditions contained in this
Agreement. During the Term, the Executive shall make himself
available to the Company and to any of its subsidiaries or affiliates as
directed to pursue the business of the Company subject to the supervision and
direction of the Board of Directors of the Company (the “Board”).
1.2 The Board
may assign Executive such general management and supervisory responsibilities
and executive duties for the Company as are appropriate and commensurate with
the Executive’s position as CFO with the understanding that the Executive shall
be based where the Lender’s principal offices are located.
1.3 The
Lender agrees that the Executive shall devote up to ninety (90) hours per month
of the Executive’s business time, energies and attention to the performance of
his duties hereunder and as CFO. Nothing herein shall be construed as
precluding the Executive from owning, purchasing, selling, or otherwise dealing
in any manner with any property or engaging in any business whatsoever,
including without limitation, providing consulting services, acting as a
director of another company, or starting a new business, without notice to,
participation of, and liability to the Company; provided, however, that all such
activities shall not materially interfere with the performance of the
Executive’s duties hereunder or violate the provisions of Section 4.4
hereof.
2. Fees and Expenses.
For all services to be rendered by the Executive pursuant to this Agreement, the
Company shall compensate the Lender as follows:
2.1 Cash Fee. Subject to
the continuous service of the Executive during the Term, the Company shall pay
to the Lender an annual fee of $70,000 payable in four (4) quarterly
installments of $17,500 on the first business day of each quarter, commencing on
April 27, 2010, payable in 30 days.
2.2 Stock Fee. Upon the
execution of this Agreement, the Company shall issue to the Lender 20,000 shares
of the Company’s common stock, par value $0.00001 per share, in the form of a
restricted stock grant (the “Shares”), which Shares shall be held in escrow by
the Company’s legal counsel and shall be distributed to the Lender immediately
at the end of the Term. Subject to the continuous service of the Executive
during the Term, the Shares shall vest as follows: 3,562 shares on June 30,
2010, 5,041 shares on September 30, 2010, 5,041 shares on December 31, 2010,
4,932 shares on March 31, 2011 and 1,424 shares on April 26, 2011. The Shares
shall be subject to the following additional terms:
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(a) The
Shares shall be “restricted” and cannot be resold without their prior
registration or compliance with the terms of Rule 144 promulgated under the
Securities Act of 1933, as amended (the “Securities Act”), or an exemption
therefrom.
(b) The
Shares shall be subject to adjustment in the case of any stock split, reverse
stock split, combination or similar events.
(c) Upon
the filing of an election pursuant to Section 83(b) of the Internal Revenue Code
with respect to the Shares, the Company will not reimburse the Executive for any
federal and state taxes due as a result of such election.
(d) During
the Term, the Executive shall not, directly or indirectly, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, lend
or otherwise transfer or dispose of, directly or indirectly, any of the Shares
or (ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of any of the
Shares, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of the Shares, in cash or otherwise.
(e) In
connection with the issuance of the Shares, the Executive hereby represents and
warrants to the Company, as of the date hereof, that:
(i) The
Shares will be acquired for investment for the Executive’s own account, not as a
nominee or agent, and not with a view to the public resale or distribution
thereof within the meaning of the Securities Act, and the Executive has no present intention
of selling, granting any participation in or otherwise distributing the
same;
(ii) The
Executive understands that the acquisition of the Shares involves substantial
risk. The Executive has experience as an investor in securities of companies and
acknowledges that it is able to fend for himself, can bear the economic risk of
his investment and has such knowledge and experience in financial or business
matters that he is capable of evaluating the merits and risks of his investment
and protecting his own interests in connection with this
investment;
(iii) The
Executive is an "accredited investor" within the meaning of Regulation D of the
Securities Act; and
(iv) The
Executive understands that (A) the Shares are characterized as "restricted
securities" under the Securities Act, inasmuch as it are being acquired from the
Company in a transaction not involving a public offering, and (B) under the
Securities Act and applicable rules and regulations thereunder, such securities
may be resold without registration under the Securities Act only in certain
limited circumstances. The Executive is familiar with Rule 144 under the
Securities Act, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.
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2.3 D&O
Insurance.
During the Term, the Company shall include the Executive as insured under
a directors and
officers insurance policy (the “D&O Insurance”) with initial coverage of
$1,000,000 from an insurance carrier that has a minimum rating of XII A as
defined by the A.M. Best Company. If any member of the Board enters into
an indemnification agreement with the Company as part of the D&O Insurance,
the Executive shall be entitled to enter into an agreement of like tenor with
the Company. Additionally, if the Board decides to increase the coverage of the
D&O Insurance, the Executive shall be covered by such policy.
2.4 Expenses. The Company
shall reimburse the Executive for all reasonable business expenses incurred by
him during the Term, upon presentation by the Executive of such documentation
and records as the Company shall from time to time require, provided that any
expense in excess of $500.00 shall require the prior written approval of the
Company. When the Executive is required to travel on behalf of the Company’s
business, the cost of an economic class ticket for any flight that is less than
two (2) hours, and the cost of a business class ticket for any flight that is
two (2) hours or more, shall be included hereunder as a reimbursable business
expense.
2.5 All
payments herein shall be made to the Lender via wire transfer without deduction
for any applicable wire transfer fees.
3. Term and
Termination.
3.1 The term
of this Agreement commences as of the Effective Date and shall continue for one
(1) year unless sooner terminated as herein provided (the “Term”).
3.2 If the
Executive dies during the Term, this Agreement shall thereupon terminate, except
that the Company shall pay to the Lender any fee under Section 2.1 and expenses
under Section 2.3 that have accrued and are unpaid, as well as that portion of
the Shares vested under Section 2.2, at the time of the Executive’s
death.
3.3 The
Company reserves the right to terminate this Agreement upon ten (10) days
written notice if, for a continuous or accumulated period of forty-five (45)
days during the Term, the Executive is prevented from discharging his duties
under this Agreement due to any physical or mental disability. With the
exception of the covenants included in Section 4 below, upon such termination,
the obligations of the Executive and the Company under this Agreement shall
immediately cease. Upon termination pursuant to this Section 3.3, the
Company shall pay to the Lender any fee under Section 2.1 and expenses under
Section 2.3 that have accrued and are unpaid, as well as that portion of the
Shares vested under Section 2.2, at the cessation of the Executive’s
services.
3.4 The
Company reserves the right to declare the Lender in default of, and terminate
for cause, this Agreement if the Executive willfully breaches or habitually
neglects the duties which he is required to perform under this Agreement, or if
the Executive commits such acts of dishonesty, fraud, misrepresentation, gross
negligence or willful misconduct as would prevent the effective performance of
his duties or which results in material harm to the Company or its
business. Termination under this Section 3.4 shall be effective upon
written notice to the Lender pursuant to Section 6.3. Upon delivery of such
notice, the obligations of the Lender and the Company under this Agreement
shall, with the exception of the covenants included in Section 4 below,
immediately cease. Such termination shall be without prejudice to any
other remedy to which the Company may be entitled either at law, in equity, or
under this Agreement. Upon termination pursuant to this Section 3.4,
the Company shall pay to the Lender any fee under Section 2.1 and expenses under
Section 2.3 that have accrued and are unpaid at the time of
termination.
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3.5 This
Agreement may be terminated at any time by the Lender upon not less than ninety
(90) days written notice by the Lender to the Board pursuant to Section 6.3.
With the exception of the covenants included in Section 4 below, upon such
termination the obligations of the Lender and the Company under this Agreement
shall immediately cease. Upon termination pursuant to this Section
3.5, the Company shall pay to the Lender any fee under Section 2.1 and expenses
under Section 2.3 that have accrued and are unpaid at the time of
termination.
3.6 This
Agreement may be terminated at any time by the Company upon not less than thirty
(30) days written notice by the Company to the Lender pursuant to Section
6.3. With the exception of the covenants included in Section 4 below,
upon such termination the obligations of the Lender and the Company under this
Agreement shall immediately cease. Upon termination pursuant to this
Section 3.6, the Company shall pay to the Lender any fee under Section 2.1 and
expenses under Section 2.3 that have accrued and are unpaid, as well as that
portion of the Shares vested under Section 2.2, at the time of
termination.
4. Protection of Confidential
Information; Non-Competition.
4.1 The
Lender acknowledges (and shall require the Executive to so acknowledge)
that:
(a) As a
result of the Executive’s association with the Company pursuant to this
Agreement, the Executive will obtain secret and confidential information
concerning the business of the Company and its subsidiaries and affiliates
(referred to collectively in this Section 4 as the “Group”), including, without
limitation, trade secrets and any information concerning products, processes,
formulas, designs, inventions (whether or not patentable or registrable under
copyright or similar laws, and whether or not reduced to practice), discoveries,
concepts, ideas, improvements, techniques, methods, research, development and
test results, specifications, data, know-how, software, formats, marketing
plans, and analyses, business plans and analyses, strategies, forecasts,
customer and supplier identities, characteristics and agreement (“Confidential
Information”). In addition, the Executive may become aware of
business opportunities that may be beneficial to the Group including, but not
limited, opportunities to acquire or purchase, or, except for Permitted
Competitive Investments, otherwise make equity or debt investments in, companies
primarily involved in a Competitive Business (“Corporate Opportunities”), during
the Term, whether in the course of his services or otherwise, and that such
Corporate Opportunities shall considered to be business opportunities of the
Group.
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(b) The Group
will suffer substantial damage which will be difficult to compute if, during the
Term or thereafter, the Lender and/or the Executive should enter a business
competitive with the Group or divulge Confidential Information.
(c) The
provisions of this Agreement are reasonable and necessary for the protection of
the business of the Group.
4.2 The
Lender agrees (and shall require the Executive to so agree) that it will not at
any time, either during the Term or thereafter, divulge to any person or entity
any Confidential Information obtained or learned by it as a result of the
Executive’s services with the Group, except (i) as required in the course
of performing the Executive’s duties hereunder, (ii) to the extent that any
such information is in the public domain other than as a result of the breach by
the Lender of its obligations under this Section 4, (iii) where required to
be disclosed by court order, subpoena or other government process, or
(iv) if such disclosure is made without the Lender’s knowing intent by the
Lender and/or the Executive to cause material harm to the Group. If
the Lender and/or the Executive shall be required to make disclosure pursuant to
the provisions of clause (iii) of the preceding sentence, they shall promptly,
but in no event more than 24 hours after learning of such subpoena, court order,
or other government process, notify the Company pursuant to Section 6.3 and
shall, at the Company’s expense: (a) take reasonably necessary and lawful steps
required by the Group to defend against the enforcement of such subpoena, court
order or other government process, and (b) permit the Group to intervene and
participate with counsel of its choice in any proceeding relating to the
enforcement thereof.
4.3 Upon
termination of this Agreement, the Executive will promptly deliver to the Group
all memoranda, correspondence, notes, records, reports, manuals, drawings,
blue-prints and other documents (and all copies thereof) relating to the
business of the Group and all property associated therewith, which he may then
possess or have under his control whether prepared by him or
others.
4.4 During
the Term and terminating three years thereafter, the Lender agrees (and shall
require the Executive to so agree) that the Executive, without the prior written
permission of the Company, shall not for any reason whatsoever, (i) enter into
the employ of or render any services to any person, firm or corporation engaged
in any business which is in competition with the Group’s principal existing
business at the time of termination (“Competitive Business”); (ii) engage in any
Competitive Business as an individual, partner, shareholder, creditor, director,
officer, principal, agent, employee, trustee consultant, advisor or in any other
relationship or capacity; (iii) employ, or have or cause any other person or
entity to employ, any person who was employed by the Group at the termination of
this Agreement; or (iv) solicit, interfere with, or endeavor to entice away from
the Group, for the benefit of a Competitive Business, any of its
customers. Notwithstanding the foregoing, (i) neither the Lender nor
the Executive shall not be precluded from investing and managing the investment
of, its or his assets in the securities of any corporation or other business
entity which is engaged in a Competitive Business if such securities are traded
on a national stock exchange or in the over-the-counter market and if such
investment does not result in its or his beneficially owning, at any time, more
than 2% of any class of the publicly-traded equity securities of such
Competitive Business (“Permitted Competitive Investment”); and (ii) during the
Term and terminating one year thereafter (except for investments in a class of
securities trading on public markets), the Lender and the Executive: (a) shall
be prohibited from taking for itself or himself personally any Corporate
Opportunities, and (b) shall refer to the Company for consideration (before any
other party) any and all Corporate Opportunities that arise during the Term or
for a period of one year thereafter. If the Company determines not to
exploit any Corporate Opportunity, the Company shall determine what, if
anything, should be done with such opportunity. Neither the Lender
nor the Executive shall be entitled to any compensation, as a finder or
otherwise, if either the Company or the Lender or the Executive introduces such
opportunity to other persons, it being understood that any such compensation
shall be paid to the Company.
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4.5 If either
the Lender or the Executive commits a breach of any provision of this Section 4,
the Company shall have the right:
(a) to have
such provision specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed by the Lender and the Executive that the services
being rendered hereunder to the Company are of a special, unique and
extraordinary character and that any breach or threatened breach will cause
irreparable injury to the Group and that money damages will not provide an
adequate remedy to the Group;
(b) to
require the Lender and/or the Executive to account for and pay over to the
Company all monetary damages determined by a non-appealable decision by a court
of law to have been suffered by the Group as the result of any actions
constituting a breach of any such provision, and the Lender and the Executive
hereby agree to account for and pay over such damages to the Company;
and
(c) to not
perform any obligation owed to the Lender under this Agreement, to the fullest
extent permitted by law. The Company shall also have the right, to the fullest
extent permitted by law, to adjust any amount due and owing or to be due and
owing to the Lender, whether under this Agreement or any other agreement between
the Company and the Lender in order to satisfy any losses to the Group as a
result of such breach.
4.6 If the
Lender or the Executive shall violate any covenant contained in Section 4.4, the
duration of such covenant so violated shall be automatically extended for a
period of time equal to the period of such violation.
5. Lender
Representations. The Lender represents that it is a validly
existing corporation and has the sole and exclusive right and authority to
provide the services of Executive to the Company as contemplated by this
Agreement, and that the entering into and performance of this Agreement by the
Lender and the provision of services hereunder by the Executive and the
acceptance thereof by the Company will not violate any law, rule, regulation,
order, contract or agreement to which either the Lender or the Executive is a
party or is bound or affected.
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6. Miscellaneous
Provisions.
6.1 The
parties acknowledge and agree that the relationship between the Company and the
Lender is that of independent contractors and not that of employer and employee.
Nothing in this Agreement is intended to create or will be deemed to create or
constitute a joint venture or partnership between the Company and
Lender.
6.2 The
Lender shall be responsible for the payment of all withholding, payroll and
other taxes payable in respect of the payments received by the Lender under this
Agreement and hereby agrees to indemnify and hold the Company harmless from any
obligation or penalty arising from the failure to pay such taxes.
6.3 All
notices provided for in this Agreement shall be in writing, and shall be deemed
to have been duly given when delivered personally to the party to receive the
same, when delivered via overnight courier providing for next day delivery
service (“Overnight Courier”), when transmitted by facsimile (electronic receipt
confirmed), or when mailed first class postage prepaid, by certified mail,
return receipt requested, addressed to the party to receive the same at his or
its address set forth below, or such other address as the party to receive the
same shall have specified by written notice given in the manner provided for in
this Section 6.3. All notices shall be deemed to have been given: (a)
as of the date of personal delivery, (b) the first business day after delivery
via Overnight Courier, (c) on the electronically confirmed date of receipt
during business hours of the facsimile transmittal (or the following business
day if the facsimile is received after 5:30 p.m. PDT), or (d) three calendar
days after the date of deposit (postage pre-paid) with the U.S. Postal Service
if delivered via first class or certified mail.
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If
to Lender:
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Worldwide
Officers, Inc.
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0000
Xxxxxxxxxxx Xxxxx
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Xxxxxxxxxx
Xxxxx, XX 00000
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Fax:
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If
to Executive:
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Bennet
P. Tchaikovsky
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c/o
Worldwide Officers, Inc.
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0000
Xxxxxxxxxxx Xxxxx
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Xxxxxxxxxx
Xxxxx, XX 00000
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Fax:
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If
to the Company:
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VLOV,
Inc.
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Room
11/F
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Xiamen
Guanyin Shan International Commercial Operation Centre
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A3-2
124
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Xxxxx
Bei Road, Siming District, Xiamen
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Fujian
Province, People’s Republic of China
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Attn:
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Fax:
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7
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With
a copy to:
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Xxxxxxxxxx
& Xxxxx, LLP
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Xxxxxxx
Plaza
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00000
Xxxxxxxx Xxxxxxxxx, Xxxxx 000
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Xxx
Xxxxxxx, XX 00000
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Attn:
Xxxxx X. Xxxxx, Esq.
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Fax:
(000) 000-0000
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6.4 In
addition to Section 2.3, the Company, shall to the fullest extent permitted by
law, indemnify the Executive for any liability, damages, losses, costs and
expenses arising out of alleged or actual claims (collectively, “Claims”) made
against the Executive for any actions or omissions during the Term by the
Executive as an officer of the Company.
6.5 The
provisions of Section 4, 5.2 and 5.3 and any provisions relating to payments to
the Lender after termination of this Agreement shall survive termination of this
Agreement for any reason.
6.6 This
Agreement sets forth the entire agreement of the parties relating to the
provision of services by the Executive to the Company and is intended to
supersede all prior negotiations, understandings and agreements. No
provisions of this Agreement may be waived or changed except by writing by the
party against whom such waiver or change is sought to be enforced. The failure
of any party to require performance of any provision hereof or thereof shall in
no manner affect the right at a later time to enforce such
provision.
6.7 All
questions with respect to the construction of this Agreement, and the rights and
obligations of the parties hereunder, shall be determined in accordance with the
law of the State of Nevada applicable to agreements made and to be performed
entirely in the State of Nevada. Any disputes, claims or causes of action by one
party against the other arising out of, in related to or concerning this
Agreement shall be commenced and maintained in any state or federal court
located in Los Angeles County of the State of California, and the Lender hereby
submits to the jurisdiction and venue of any such court.
6.8 This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the Company. This Agreement shall not be assignable by the
Lender, but shall inure to the benefit of and be binding upon its successors and
assigns.
6.9 It is the
desire and intent of the parties that the terms, provisions, covenants and
remedies contained in this Agreement shall be enforceable to the fullest extent
permitted by law. If any such term, provision, covenant or remedy of
this Agreement or the application thereof to any person or circumstances shall,
to any extent, be construed to be invalid or unenforceable in whole or in part,
then such term, provision, covenant or remedy shall be construed in a manner so
as to permit its enforceability under the applicable law, to the fullest extent
permitted by law. In any case, the remaining provisions of the
Agreement and the application thereof to any person or circumstance other than
those to which they have been held invalid or unenforceable, shall remain valid
and in full force and effect.
[Remainder
of Page Intentionally Blank]
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IN
WITNESS WHEREOF, the parties have executed this Loanout Agreement as of the date
first above written.
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“COMPANY”
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“LENDER”
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VLOV,
INC.
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WORLDWIDE
OFFICERS, INC.
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By:
/s/ Xxxxxxxx
Xx
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By:
/s/ Bennet P.
Tchaikovsky
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Name:
Xxxxxxxx Xx
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Name:
Xxxxxx X. Tchaikovsky
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Title:
Chief Executive Officer
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Title:
Chief Executive Officer
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ACKNOWLEDGED
BY:
“EXECUTIVE”
/s/ Bennet P.
Tchaikovsky__________
Bennet P.
Tchaikovsky
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