Document:

f8k030111ex10xiii_kirin.htm

Exhibit 10.13

 

CALL OPTION AGREEMENT

 

This CALL OPTION AGREEMENT (this “Agreement”) is made and entered into as of December 22, 2010 (the “Effective Date”), between Mu Xiangju, a resident of the People’s Republic of China (the “PRC”), with ID Card Number of 110102194711011120 (the “Purchaser”) and Iwamatsu Reien, a resident of Japan, with Passport Number of TH9513636 (the “Seller”). Purchaser and Seller are also referred to herein together as the “Parties” and individually as a “Party.”

 

RECITALS

 

WHEREAS, Solid Wise Limited is a corporation incorporated under the law of British Virgin Islands (the “BVI Co.”) and the Seller holds 100% shares of common stock (the “Common Stock”) of the BVI Co., representing 100% of total issued and outstanding common stock of the BVI Co.;

 

WHEREAS, Kirin China Holding Ltd. is a corporation incorporated in British Virgin Islands (the “New Co.”), which is a subsidiary of the BVI Co.;

 

WHEREAS, the New Co. holds 100% shares of the common stock of Kirin Huaxia Development Limited., is a corporation incorporated in Hong Kong Special Administrative Region (the “Holding Co.”), representing 100% of total issued and outstanding common stock of the Holding Co.;

 

WHEREAS, the Holding Co. holds 100% share equity of Shijiazhuang Kirin Management Consulting Co., Ltd. (the “WFOE”), a wholly foreign owned enterprise incorporated in PRC, which consolidates all the financials of the Hebei Zhongding Real Estate Development Co., Ltd. and Xingtai Zhongding Jiye Real Estate Development Co., Ltd. (collectively referred to the “Companies”) via contractual arrangement;

 

WHEREAS, the Seller desires to grant to the Purchaser an option to acquire 100% of the shares of Common Stock held by him/her, representing 100% of total issued and outstanding common stock of the BVI Co. (for purposes of this Agreement, including the Call Right described herein, the “Seller’s Shares”) pursuant to the terms and conditions set forth herein;

 

NOW, THEREFORE, the Parties, in consideration of the foregoing premises and the terms, covenants and conditions set forth below, and for other good and valuable consideration, receipt of which is acknowledged, hereby agree as follows:

 

AGREEMENT

 

1.   DEFINITIONS; INTERPRETATION

 

1.1.   Terms Defined in this Agreement. The following terms when used in this Agreement shall have the following definitions:

 

“Bankruptcy Law” means any Law of any jurisdiction relating to bankruptcy, insolvency, corporate reorganization, company arrangement, civil rehabilitation, special liquidation, moratorium, readjustment of debt, appointment of a conservator, trustee or receiver, or similar debtor relief.

 

“Business Day” means any day on which commercial banks are required to be open in the United States.

 

“Call Price” means, with respect to any exercise of the Call Right, US Dollar 0.0001 per share of the Seller’s Shares subject to any Call Exercise Notice.

 

“Conditions” means Conditions 1 through 3, as defined below, in the aggregate.

 

  

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“Condition 1” means the Companies and their subsidiaries achieving not less than after tax net income of US$ 1 million as determined under United States Generally Accepted Accounting Principles consistently applied (“US GAAP”) for the fiscal year ended December 31, 2009.

 

“Condition 2” means the Companies and their subsidiaries achieving not less than after tax net income of US$ 2 million as determined under US GAAP for the fiscal year ended December 31, 2010.

 

“Condition 3” means the Companies and their subsidiaries achieving not less than after tax net income of US$ 3 million as determined under US GAAP for the fiscal year ended December 31, 2011.

 

"Distributions" means any cash proceeds arising from or in respect of, or in exchange for, or accruing to or in consequence of the Seller’s Shares from the date hereof to the Expiration Date, including without limitation, the Dividends.

 

"Dividends" means the dividends declared by Holding Co and accrued in respect of the Seller’s Shares (whether or not such dividends shall have been paid and received by the Purchaser or his Nominee(s)).

 

“Government Authority” means any: (a) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi governmental authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body or Person and any court or other tribunal); or (d) individual, Person or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature.

 

“Law” means any federal, state, local, municipal, foreign or other law, statute, legislation, constitution, principle of common law, resolution, ordinance, code, order, edict, decree, proclamation, treaty, convention, rule, regulation, permit, ruling, directive, pronouncement, requirement (licensing or otherwise), specification, determination, decision, opinion or interpretation that is, has been or may in the future be issued, enacted, adopted, passed, approved, promulgated, made, implemented or otherwise put into effect by or under the authority of any Government Authority.

 

"Nominee" means such person nominated by the Purchaser in the Transfer Notice to be the transferee of the Call Right or the Seller’s Shares;

 

“Person” means any individual, firm, company, corporation, limited liability company, unincorporated association, partnership, trust, joint venture, governmental authority or other entity, and shall include any successor (by merger or otherwise) of such entity.

 

“Transfer Notice” means the notice substantially in the form set out in Appendix B.

 

“Call Right”, means according to the context, the option that the Purchaser has to purchase the Seller’s Shares or the shares of the Ultimate Controller upon conversion, subject to the terms and conditions of this Agreement.

 

1.2.   Interpretation.

 

(a)   Certain Terms. The words “hereof,” “herein,” “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement. The term “including” is not limited and means “including without limitation.”

 

  

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(b)   Section References; Titles and Subtitles. Unless otherwise noted, all references to Sections herein are to Sections of this Agreement. The titles, captions and headings of this Agreement are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

 

(c)   Reference to Entities, Agreements, Statutes. Unless otherwise expressly provided herein, (i) references to a Person include its successors and permitted assigns, (ii) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments, restatements and other modifications thereto or supplements thereof and (iii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such statute or regulation.

 

2.    CALL RIGHT, VOTING TRUST AND CONVERSION RIGHT

 

2.1.   Call Right. The Purchaser shall have, during the Exercise Period (as defined below), and when a Condition is met, the right and option to purchase from the Seller, and upon the exercise of such right and option the Seller shall have the obligation to sell to the Purchaser or his Nominee(s), a portion of the Seller’s Shares identified in the Call Exercise Notice (the “Call Right”). Purchaser or Nominee(s) shall be permitted to purchase, and Seller shall be obligated to sell, the following number of Seller’s Shares upon the attainment of the following Conditions:

 

	Condition	 	The percentage of the Seller’s Shares	 
	 	 	 	 
	Condition 1	 	 	40	%
	 	 	 	 	 
	Condition 2	 	 	30	%
	 	 	 	 	 
	Condition 3	 	 	30	%

 

However, in case that the Companies and their subsidiaries achieve not less than $ 3 million in after-tax income, as determined under US GAAP, for the fiscal year ending December 31, 2010, then the Purchaser or his Nominee(s) shall be permitted to purchase and the Seller shall be obligated to sell, all Seller Shares owned by the Seller at the price of USD 1.00 and it shall be considered that Condition 3 has been met; for purpose of avoiding doubt, under such circumstance, there will be no more call right to be granted to the Purchaser even if the Company and its subsidiaries achieves not less than $ 3 million in after-tax income, as determined under US GAAP, for the fiscal year ending December 31, 2011.

 

Notwithstanding anything in this Agreement, in case that the Seller violates any provision of this Agreement, the Purchaser shall receive an irrevocable Call Right to any and all of the Seller’s Shares then held by the Seller, without any regard to the Conditions being met. The Purchaser shall be entitled to exercise such Call Right immediately and the Seller shall transfer to the Purchaser or his Nominee(s) all the Seller’s Shares immediately upon the Purchaser’s or his Nominee(s)’s exercise of such Call Right.

 

2.2.   Call Period. The Call Right shall be exercisable by Purchaser, by delivering a Call Exercise Notice at any time during the period (the “Exercise Period”) commencing on the date hereof and ending at 6:30 p.m. (New York time) on the fifth anniversary date therefrom (such date or the earlier expiration of the Call Right is referred to herein as the “Expiration Date”).

 

2.3.   Nominees: The Purchaser may, at any time during the Exercise Period, at his sole discretion, nominate one or more person(s) (each a “Nominee”) to be the transferee(s) of whole or part of his Call Right, who shall hold and/or exercise the transferred Call Right on behalf of the Purchaser.

 

  

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2.4.   Exercise Process. In order to exercise the Call Right during the Exercise Period, the Purchaser or his Nominee(s) shall deliver to the Seller, a written notice of such exercise substantially in the form attached hereto as Appendix A (a “Call Exercise Notice”) to such address or facsimile number as set forth therein. The Call Exercise Notice shall indicate the number of the Seller’s Shares as to which the Purchaser or his Nominee(s) is/are then exercising his/her Call Right and the aggregate Call Price. Provided the Call Exercise Notice is delivered in accordance with Section 5.4 to the Seller on or before 6:30 p.m. (New York time) on a Business Day, the date of exercise (the “Exercise Date”) of the Call Right shall be the date of such delivery of such Call Exercise Notice. In the event the Call Exercise Notice is delivered after 6:30 p.m. (New York time) on a Business Day or on a day which is not a Business Day, the Exercise Date shall be deemed to be the first Business Day after the date of such delivery of such Call Exercise Notice. The delivery of a Call Exercise Notice in accordance herewith shall constitute a binding obligation (a) on the part of the Purchaser or his Nominee(s) to purchase, and (b) on the part of the Seller to sell, the Seller’s Shares subject to such Call Exercise Notice in accordance with the terms of this Agreement.

 

2.5.   Call Price. If the Call Right is exercised pursuant to this Section 2, as payment for the Seller’s Shares being purchased by the Purchaser or Nominee(s) pursuant to the Call Right, such Purchaser or Nominee(s) shall pay the aggregate Call Price to the Seller within fifteen (15) Business Days of the Exercise Date.

 

2.6   Delivery of the Shares. Upon the receipt of a Call Exercise Notice, the Seller shall deliver, or take all steps necessary to cause to be delivered the Seller’s Shares being purchased pursuant to such Call Exercise Notice within three (3) Business Days of the date of a Call Exercise Notice.

 

2.7   Transfer Notice: In case that the Purchaser transfers any or all of his Call Right to one or more Nominees in accordance with Section 2.3 above, the Purchaser shall provide a Transfer Notice to the Seller.

 

2.8   Voting Trust: The Seller hereby agrees to irrevocably appoint the Purchaser with the exclusive right to exercise, on his/her behalf, all of his/her voting rights of the Seller’s Shares in accordance with the relevant laws and Articles of Association or similar constitutional documents of the BVI Co.; the Purchaser shall have right to vote on behalf of the Seller to vote for relevant issues including but not limited to selling or transferring all or any of his/her shares of the BVI Co., and to appoint and elect the directors of the BVI Co. before all Seller’s Shares are transferred to the Purchaser. The Purchaser agrees to accept such authorization.

 

3.   ENCUMBRANCES; TRANSFERS, SET-OFF AND WITHHOLDINGS

 

3.1.   Encumbrances. Upon exercise of the Call Right, the Seller’s Shares being purchased shall be sold, transferred and delivered to the Purchaser free and clear of any claim, pledge, charge, lien, preemptive rights, restrictions on transfers (except as required by securities laws of the United States), proxies, voting agreements and any other encumbrance whatsoever.

 

3.2   Transfers. Prior to the Expiration Date, the Seller shall continue to own, free and clear of any hypothecation, pledge, mortgage or other encumbrance, except pursuant to this Agreement and except in favor of the Collateral Agent (as defined below) for the benefit of the Purchaser, such amount of the Seller’s Shares as may be required from time to time in order for the Purchaser to exercise his Call Right in full.

 

3.3.   Set-off. The Purchaser shall be entitled to receive all of the Seller’s Shares subject to the exercise of a Call Right, and for the purposes of this Agreement, Seller hereby waives, as against the Purchaser or his Nominee(s), all rights of set-off or counterclaim that would or might otherwise be available to the Seller.

 

4.   REPRESENTATIONS,WARRANTIES AND COVENANTS.

 

4.1.   Representations and Warranties by the Seller. The Seller represents and warrants to the Purchaser that:

 

(a)   Valid and Binding Obligations. This Agreement, and all agreements and documents executed and delivered pursuant to this Agreement, constitute valid and binding obligations of the Seller, enforceable against such Seller in accordance with its terms, subject to applicable Bankruptcy Laws and other laws or equitable principles of general application affecting the rights of creditors generally.

 

  

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(b)            No Conflicts. Neither the execution or delivery of this Agreement by the Seller nor the fulfillment or compliance by the Seller with any of the terms hereof shall, with or without the giving of notice and/or the passage of time, (i) conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract or any judgment, decree or order to which Seller is subject or by which the Seller is bound, or (ii) require any consent, license, permit, authorization, approval or other action by any Person or Government Authority which has not yet been obtained or received. The execution, delivery and performance of this Agreement by the Seller or compliance with the provisions hereof by the Seller do not, and shall not, violate any provision of any Law to which the Seller is subject or by which it is bound.

 

(c)            No Actions. There are no lawsuits, actions (or to the best knowledge of the Seller, investigations), claims or demands from any other third party, or other proceedings pending or, to the best of the knowledge of the Seller, threatened against the Seller which, if resolved in a manner adverse to the Seller, would adversely affect the right or ability of the Seller to carry out its obligations set forth in this Agreement (the “Actions”) as of the execution of this Agreement. The Seller further warrants and covenants that such actions will not occur after the execution of this Agreement.

 

(d)            Title. The Seller owns the Seller’s Shares free and clear of any claim, pledge, charge, lien, preemptive rights, restrictions on transfers, proxies, voting agreements and any other encumbrance whatsoever, except as contemplated by this Agreement. The Seller has not entered into or is a party to any agreement that would cause the Seller to not own such Seller’s Shares free and clear of any encumbrance, except as contemplated by this Agreement.

 

(e)            Exercise of Rights. Without first obtaining written instruction from the Purchaser, the Seller will not exercise any rights in connection with the Seller’s Shares to which the Seller is entitled as of the date of this Agreement, including but not limited to voting rights, share transfer right, dividends rights, preemptive right or any rights in connection with pledge, proxy, charge, lien. The Seller further warrants and covenants that it will, unconditionally and immediately, exercise any rights in connection with the Seller’s Shares in compliance with the Purchaser’s written instruction upon its receipt of such written instruction.

 

4.2   Representations and Warranties by Purchaser. The Purchaser represents and warrants to the Seller that:

 

(a)            Valid and Binding Obligations. This Agreement, and all agreements and documents executed and delivered pursuant to this Agreement, constitute valid and binding obligations of the Purchaser, enforceable against the Purchaser in accordance with its terms, subject to applicable Bankruptcy Laws and other laws or equitable principles of general application affecting the rights of creditors generally.

 

(b)            No Conflicts. Neither the execution nor delivery of this Agreement by the Purchaser nor the fulfillment or compliance by the Purchaser with any of the terms hereof shall, with or without the giving of notice and/or the passage of time, (i) conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract or any judgment, decree or order to which Purchaser is subject or by which Purchaser is bound, or (ii) require any consent, license, permit, authorization, approval or other action by any Person or Government Authority which has not yet been obtained or received. The execution, delivery and performance of this Agreement by the Purchaser or compliance with the provisions hereof by the Purchaser do not, and shall not, violate any provision of any Law to which Purchaser is subject or by which it is bound.

 

(c)            No Actions. There are no lawsuits, actions (or to the best knowledge of the Purchaser, investigations), claims or demands or other proceedings pending or, to the best of the knowledge of the Purchaser, threatened against the Purchaser which, if resolved in a manner adverse to the Purchaser, would adversely affect the right or ability of the Purchaser to carry out his obligations set forth in this Agreement.

 

  

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4.3 Covenants.

 

(a)   Without the prior written consent of the Purchaser, the Seller shall vote the Seller’s Shares such that BVI Co. shall not, (i) issue or create any new shares, equity, registered capital, ownership interest, or equity-linked securities, or any options or warrants that are directly convertible into, or exercisable or exchangeable for, shares, equity, registered capital, ownership interest, or equity-linked securities of BVI Co., or other similar equivalent arrangements, (ii) alter the shareholding structure of BVI Co., New Co., Holding Co. or WFOE, (iii) cancel or otherwise alter the Seller’s Shares, (iv) amend the charter or the by-laws of BVI Co., (v) liquidate or wind up BVI Co., (vi) sell, transfer, assign, hypothecate or otherwise reduce the value of any assets held by BVI Co., including but without limitation, any and all shares in New CO. (vi) act or omit to act in such a way that would be detrimental to the interest of the Purchaser in the Seller’s Shares, (vii) transfer, assign, pledge, hypothecate or vest any option on his shares in BVI Co. to any third party. The Seller shall cause BVI CO., New Co., Holding Co. and WFOE to disclose to the Purchaser true copies of all the financial, legal and commercial documents of BVI Co., New Co., Holding Co. and WFOE and the resolutions of the shareholders and the board of directors.

 

(b)   The Seller agrees that the Purchaser or his Nominee(s) shall be entitled to all the Distributions in respect of the Seller’s Shares. In the event that any such Distributions have been received by the Seller for any reason, the Seller shall, at the request of the Purchaser, pay an amount equivalent to the Distributions received by him to the Purchaser or his Nominee(s) at the time of the exercise of the Call Right by the Purchaser or his Nominee(s).

 

(c)   The transaction contemplated hereunder and any information exchanged between the Parties pursuant to this Agreement will be held in complete and strict confidence by the concerned Parties and their respective advisors, and will not be disclosed to any person except: (i) to the Parties’ respective officers, directors, employees, agents, representatives, advisors, counsel and consultants that reasonably require such information and who agree to comply with the obligation of non-disclosure pursuant to this Agreement; (ii) with the express prior written consent of the other Party; or (iii) as may be required to comply with any applicable law, order, regulation or ruling, or an order, request or direction of a government agency; provided, however, that the foregoing shall not apply to information that: (1) was known to the receiving Party prior to its first receipt from the other Party; (2) becomes a matter of public knowledge without the fault of the receiving Party; or (3) is lawfully received by the Party from a third person with no restrictions on its further dissemination.

 

(d)   If at any time: (i) the Seller fails to deliver the Seller’s Shares in accordance with this Agreement, if such failure is not remedied on or before the third Business Day after notice of such failure is given to the Seller by the Purchaser; (ii) the Seller fails to comply with or perform any agreement, covenant or obligation to be complied with or performed by the Seller in accordance with this Agreement if such failure is not remedied on or before the third Business Day after notice of such failure is given to the Seller by the Purchaser; or (iii) the Seller (1) becomes insolvent or is unable to pay his debts or fails or admits in writing his inability generally to pay his debts as they become due; (2) makes a general assignment, arrangement or composition with or for the benefit of his creditors; (3) institutes or has instituted against him a proceeding seeking a judgment of insolvency or bankruptcy or any relief under any Bankruptcy Law, (4) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for him or for all or substantially all his assets; (5) has a secured party that takes possession of all or substantially all his assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all his assets, (6) causes or is subject to any event with respect to him which, under the applicable Law, has an analogous effect to any of the events described in clauses (1) through (5); or (7) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts, then the Call Right shall become immediately exercisable in respect of all of the Seller’s Shares without further regard to the occurrence of any of the Conditions as per Section 2 of this Agreement.

 

  

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5.    MISCELLANEOUS.

 

5.1.   Governing Law; Jurisdiction. This Agreement shall be construed according to, and the rights of the Parties shall be governed by, the laws of the State of New York, without reference to any conflict of laws principle that would cause the application of the laws of any jurisdiction other than New York. Each Party hereby irrevocably submits to the exclusive jurisdiction of the federal and state courts sitting in the City of New York, for the adjudication of any dispute hereunder or in connection herewith, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that such, suit, action or proceeding is brought in an inconvenient forum, or that the venue of such suit, action or proceeding is improper.

 

5.2.   Successors and Assigns. No Party may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other Party. The provisions hereof shall inure to the benefit of, and be binding upon, the successors and permitted assigns of the Parties.

 

5.3.   Entire Agreement; Amendment. This Agreement constitutes the full and entire understanding and agreement between and among the Parties with regard to the subject matter hereof. Any term of this Agreement may be amended only with the written consent of each Party.

 

5.4.   Notices and Other Communications. Any and all notices, requests, demands and other communications required or otherwise contemplated to be made under this Agreement shall be in writing and shall be provided by one or more of the following means and shall be deemed to have been duly given (a) if delivered personally, when received, (b) if transmitted by facsimile, on the date of transmission with receipt of a transmittal confirmation, or (c) if by an internationally recognized overnight courier service, one Business Day after deposit with such courier service. All such notices, requests, demands and other communications shall be addressed to such address or facsimile number as a party may have specified to the other parties in writing delivered in accordance with this Section 5.4.

 

5.5.   Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any Person hereunder, upon any breach or default under this Agreement, shall impair any such right, power or remedy nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Person hereunder of any breach or default under this Agreement, or any waiver on the part of any Person of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing and signed by the waiving or consenting Person.

 

5.6.   Severability. If any provision of this Agreement is found to be invalid or unenforceable, then such provision shall be construed, to the extent feasible, so as to render the provision enforceable and to provide for the consummation of the transactions contemplated hereby on substantially the same terms as originally set forth herein, and if no feasible interpretation would save such provision, it shall be severed from the remainder of this Agreement, which shall remain in full force and effect unless the severed provision is essential to the rights or benefits intended by the Parties. In such event, the Parties shall use best efforts to negotiate, in good faith, a substitute, valid and enforceable provision or agreement which most nearly affects the Parties’ intent in entering into this Agreement.

 

5.7.   Construction. The language used in this Agreement will be deemed to be the language chosen by the Parties to express their mutual intent, and no rules of strict construction will be applied against any Party.

 

5.8.   Further Assurances. The Parties shall perform such acts, execute and deliver such instruments and documents and do all other such things as may be reasonably necessary to effect the transactions contemplated hereby.

 

5.9.   Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. Execution and delivery of this Agreement by exchange of facsimile copies bearing the facsimile signature of a Party shall constitute a valid and binding execution and delivery of this Agreement by such Party.

 

[Remainder of the Page Intentionally Left Blank]

 

  

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

 

 

 

	 	Purchaser:	 
	 	 	 
	 	/s/ 	 
	 	 	 

 

 

 

	 	Seller:	 
	 	 	 
	
 

	/s/ 	 
	 	 	 
	 	 	 

 

  

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APPENDIX A

 

Form of Exercise Notice

 

[                       ] (the “Seller”)

[                       ]

[                       ]

Attention: [                     ]

 

	 	Re:	Call Option Agreement dated                          (the “Call Option Agreement”) between [                             ] (“Purchaser”) and [                       ] (“Seller”).

 

Dear Sir:

 

In accordance with Section 2.4 of the Call Option Agreement, Purchaser hereby provides this notice of exercise of the Call Right in the manner specified below:

 

	
(a)  

	
The Purchaser hereby exercises its Call Rights with respect to Seller’s Shares pursuant to the Call Option Agreement.

 

	
(b)  

	
The Purchaser intends to buy [           ] Seller’s Shares and shall pay the sum of $                         to the Seller.

 

	
  

	 

 

Dated:                        , ______

 

  

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APPENDIX B

 

Form of Transfer Notice

 

 

	To	 :	Iwamatsu Reien (the “Seller”)
	 	 	 
	From	 :	(the “Purchaser”)

   

 

I, the undersigned, refer to the Call Option Agreement (the "Call Option Agreement") dated [           ], 2010 made between Purchaser and Seller. Terms defined in the Call Option Agreement shall have the same meanings as used herein.

 

I hereby give you notice that I will transfer to [Nominees' names] the following portion of the Call Right, expressed in terms of the number of Seller’s Shares represented by the portion of the Call Right transferred in accordance with the terms and conditions of the Call Option Agreement,.

 

 

	 	Nominees	Option Shares to be Transferred
	 	 	 
	 	 	 
	 	 	 

 

 

 

Dated [     ]

 

	Yours faithfully	 
	 	 
	/s/ 	 
	Name:	 
	[Purchaser]	 
	 	 

 

 

 

 

10f8k030111ex10xiv_kirin.htm

Exhibit 10.15

 

SECURITIES ESCROW AGREEMENT

This SECURITIES ESCROW AGREEMENT (the “Agreement”), dated as of March 1, 2011, is entered into by and among Ciglarette, Inc., a Nevada corporation (the “Company”), Prolific Lion Limited, a British Virgin Islands corporation (the “Stockholder”) and Guzov Ofsink, LLC (hereinafter referred to as the “Escrow Agent”).

RECITALS

WHEREAS, the Company is offering (the “Offering”) a minimum of $1,000,000 and up to a maximum of $10,000,000 investment units, each consisting of (i) four (4) shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), (ii) a three-year warrant to purchase one (1) share of the Company’s common stock, at an exercise price of $6.25 per share, and (iii) a three-year warrant to purchase one (1) share of the Company’s common stock, at an exercise price of $7.50 per share, as described in the Company’s Confidential Private Placement Memorandum dated December 1, 2010, as amended by that certain supplement dated February 25, 2011 (together, the “Memorandum”); and

 

WHEREAS, in connection with the Offering, the Company and the Stockholder have agreed to establish an escrow account (the “Escrow Account”) on the terms and conditions set forth in this Agreement and the Escrow Agent has agreed to act as escrow agent pursuant to the terms and conditions of this Agreement.

 

AGREEMENT

NOW, THEREFORE, in consideration of the mutual promises of the parties and the terms and conditions hereof, the parties hereby agree as follows:

 

1. Definitions.  All capitalized terms used but not defined herein shall have the meanings assigned them in the form of Subscription Agreement attached in Exhibit C to the Memorandum (the “Subscription Agreement”).

 

2. Appointment of Escrow Agent.  The Company and the Stockholder hereby appoint Guzov Ofsink, LLC as Escrow Agent to act in accordance with the terms and conditions set forth in this Agreement, and Guzov Ofsink, LLC hereby accepts such appointment and agrees to establish the Escrow Account on the terms and subject to the conditions hereinafter set forth.

 

3. Establishment of Escrow.  Upon the execution of this Agreement, the Stockholder shall deliver to the Escrow Agent a stock certificate(s) evidencing 1,000,000 shares in the aggregate of the Company’s Common Stock together with stock powers executed in blank, (collectively with shares of Common Stock transferred into the name of the Escrow Agent pursuant Section 9 hereof, the “Escrow Shares”).  Notwithstanding the foregoing transfer, the Stockholder shall have the right to vote the Escrow Shares until such time as they are eligible for transfer to the subscribers in the Offering as set forth on Exhibit A hereto (each a “Subscriber” and collectively the “Subscribers”) pursuant to the terms of this Agreement.

 

  

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4. Disbursement of Escrow Shares.

 

4.1 If the Company’s Net Income (as calculated pursuant to Section 10(c)(iii) of the Subscription Agreement) for the Company’s fiscal year ended December 31, 2010 (the “2010 Fiscal Year”) or the fiscal year ending December 31, 2011 (the “2011 Fiscal Year” and together with the 2010 Fiscal Year, each a “Fiscal Year”) is less than the Targeted Net Income for such Fiscal Year, then no later than the day after which the Company files its Annual Report on Form 10-K for the 2010 Fiscal Year End or the 2011 Fiscal Year End, as applicable, with the Securities and Exchange Commission (the “Filing Date”), the Escrow Agent shall notify the Company and the Stockholder about each disbursement of any Escrow Shares under Section 4.1 hereof with a written notice in the form attached hereto as Exhibit B (each, a “Make Good Delivery Notice”).  Escrow Agent shall , by the third business day following the Filing Date, send out to each Subscriber that number of the Escrow Shares equal to, as applicable, (y) the percentage of variation of the Actual 2010 Net Income from the 2010 Targeted Net Income times the number of Purchased Shares acquired by such Subscriber pursuant to such Subscriber’s Subscription Agreement or (z) the percentage of variation of the Actual 2011 Net Income from the 2011 Targeted Net Income times the number of Purchased Shares acquired by such Subscriber pursuant to such Subscriber’s Subscription Agreement.

 

4.2 In the event that any Escrow Shares shall be delivered to the Subscribers pursuant to Section 4.1 hereof, the Escrow Agent shall use its commercially reasonable efforts to promptly cause such Escrow Shares to be delivered, including causing the Company’s transfer agent to promptly to issue certificates in the names of the Subscribers, so that the issuances and deliveries contemplated in Section 4.1 hereof shall occur within three (3) business days of the date of the Make Good Delivery Notice.

 

4.3 If immediately following the earlier of (i) the issuance of certificates in the names of the Subscribers evidencing Escrow Shares issuable pursuant to clause (z) of Section 4.1 hereof; or (ii) April 30, 2012, any Escrow Shares remain in the Escrow Account (the “Remaining Escrow Shares”), the Escrow Agent shall use its commercially reasonable efforts to promptly cause the Remaining Escrow Shares to be delivered, including causing the Company’s transfer agent to promptly to issue certificates in the names of the Stockholder, so that such issuance and delivery shall occur within five (5) business days of the date of such earlier occurrence.

 

5. Duration. This Agreement shall terminate on the distribution of all the Escrow Shares in accordance with Section 4 above.

 

6. Interpleader.  Should any controversy arise among or between the Company, any Subscriber(s) and/or the Stockholder with respect to this Agreement or with respect to the delivery of the Escrow Shares hereunder, the Escrow Agent shall have the right to consult counsel and/or to institute an appropriate interpleader action to determine the rights of the parties hereto.  The Escrow Agent is also hereby authorized to institute an interpleader action.  Any interpleader action instituted in accordance with this Section 6 shall be filed in any court of competent jurisdiction in New York, New York, and the Escrow Shares in dispute shall be deposited with the court and in such event Escrow Agent shall be relieved of and discharged from any and all obligations and liabilities under and pursuant to this Agreement with respect to the Escrow Shares.

 

  

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7. Exculpation and Indemnification of Escrow Agent.

 

7.1 The Escrow Agent is not a party to, and is not bound by or charged with notice of any agreement out of which this escrow may arise. The Escrow Agent acts under this Agreement as a depositary only and is not responsible or liable in any manner whatsoever for the sufficiency, correctness, genuineness or validity of the subject matter of the escrow, or any part thereof, or for the form or execution of any notice given by any other party hereunder, or for the identity or authority of any person executing any such notice. The Escrow Agent will have no duties or responsibilities other than those expressly set forth herein.  The Escrow Agent will be under no liability to anyone by reason of any failure on the part of any party hereto (other than the Escrow Agent) or any maker, endorser or other signatory of any document to perform such person’s or entity’s obligations hereunder or under any such document other than as provided in this Agreement.  Except for this Agreement and instructions to the Escrow Agent pursuant to the terms of this Agreement, the Escrow Agent will not be obligated to recognize any agreement between or among any or all of the persons or entities referred to herein, notwithstanding its knowledge thereof.

 

7.2 The Escrow Agent will not be liable for any action taken or omitted by it, or any action suffered by it to be taken or omitted, in good faith and in the exercise of its own best judgment, and may rely conclusively on, and will be protected in acting upon, any order, notice, demand, certificate, or opinion or advice of counsel (including counsel chosen by the Escrow Agent), statement, instrument, report or other paper or document (not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth and acceptability of any information therein contained) which is reasonably believed by Escrow Agent to be genuine and to be signed or presented by the proper person or persons. The duties and responsibilities of the Escrow Agent hereunder shall be determined solely by the express provisions of this Agreement and no other or further duties or responsibilities shall be implied, including, but not limited to, any obligation under or imposed by any laws of the State of New York upon fiduciaries.

 

7.3 The Escrow Agent will be indemnified and held harmless, jointly and severally, by the Company and the Stockholder from and against any expenses, including reasonable attorneys’ fees and disbursements, damages or losses suffered by the Escrow Agent in connection with any claim or demand, which, in any way, directly or indirectly, arises out of or relates to this Agreement or the services of Escrow Agent hereunder and shall be indemnified and reimbursed by the Company for any and all fees and expenses incurred by it in connection with an interpleader action instituted by Escrow Agent, as such fees and expenses are incurred; except, that if the Escrow Agent is guilty of fraud or gross negligence under this Agreement, then the Escrow Agent will bear all losses, damages and expenses arising as a result of such fraud or gross negligence. Promptly after the receipt by the Escrow Agent of notice of any such demand or claim or the commencement of any action, suit or proceeding relating to such demand or claim, the Escrow Agent will notify the other parties hereto in writing.  For the purposes hereof, the terms “expense” and “loss” will include all amounts paid or payable to satisfy any such claim or demand, or in settlement of any such claim, demand, action, suit or proceeding settled with the express written consent of the parties hereto, and all costs and expenses, including, but not limited to, reasonable attorneys’ fees and disbursements, paid or incurred in investigating or defending against any such claim, demand, action, suit or proceeding.  The provisions of this Section 7 shall survive the termination of this Agreement.

 

  

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8. Fees and Expenses. For services rendered by the Escrow Agent hereunder, the Company will pay the Escrow Agent $2,500 as setup fees and $750 for each disbursement of the Escrow Shares.

 

9. Additional Escrow Shares.  In the event the Company accepts subscriptions in the Offering aggregating more than $5,000,000, the Stockholder hereby agrees to deliver to the Escrow Agent a stock certificate(s) evidencing an additional 1,000,000 shares in the aggregate of the Company’s Common Stock together with stock powers executed in blank, which such shares shall be transferred into the name of the Escrow Agent and shall be added to the Escrow Shares then held in the Escrow Account.

 

10. Resignation of Escrow Agent.  At any time, upon ten (10) days’ written notice to the Company, the Escrow Agent may resign and be discharged from its duties as escrow agent hereunder.  As soon as practicable after its resignation, the Escrow Agent will promptly turn over to a successor escrow agent appointed by the Company the Escrow Shares held hereunder upon presentation of a document appointing the new escrow agent and evidencing its acceptance thereof.  If, by the end of the 10-day period following the giving of notice of resignation by the Escrow Agent, the Company shall have failed to appoint a successor escrow agent, the Escrow Agent may interplead the Escrow Shares into the registry of any court having jurisdiction.

 

11. Records.  The Escrow Agent shall maintain accurate records of all transactions hereunder.  Promptly after the termination of this Agreement or as may reasonably be requested by the parties hereto from time to time before such termination, the Escrow Agent shall provide the parties hereto, as the case may be, with a complete copy of such records, certified by the Escrow Agent to be a complete and accurate account of all such transactions.  The authorized representatives of each of the parties hereto shall have access to such books and records at all reasonable times during normal business hours upon reasonable notice to the Escrow Agent.

 

12. Notice.  All notices, communications and instructions required or desired to be given under this Agreement must be in writing and shall be deemed to be duly given if sent by registered or certified mail, return receipt requested, or overnight courier to the following addresses:

 

If to Escrow Agent:

Guzov Ofsink, LLC

900 Third Avenue, 5th Floor,

New York, NY 10022

Attn: Darren Ofsink

 

  

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If to the Company or the Stockholder:

 

With a copy to:

Anslow + Jaclin, LLP

195 Route 9 South, Suite 204

Manalapan, NJ 07726

Attention: Gregg E. Jaclin, Esq.

or to such other address and to the attention of such other person as any of the above may have furnished to the other parties in writing and delivered in accordance with the provisions set forth above.

 

13. Execution in Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimile execution and delivery of this Agreement is legal, valid and binding for all purposes.

 

14. Assignment and Modification.  This Agreement and the rights and obligations hereunder of any of the parties hereto may not be assigned without the prior written consent of the other parties hereto. Subject to the foregoing, this Agreement will be binding upon and inure to the benefit of each of the parties hereto and their respective successors and permitted assigns. No other person will acquire or have any rights under, or by virtue of, this Agreement.  No portion of the Escrow Shares shall be subject to interference or control by any creditor of any party hereto, or be subject to being taken or reached by any legal or equitable process in satisfaction of any debt or other liability of any such party hereto prior to the disbursement thereof to such party hereto in accordance with the provisions of this Agreement. This Agreement may be changed or modified only in writing signed by all of the parties hereto.

 

15. Applicable Law. This Agreement shall be governed by and construed with the laws of the State of New York applicable to contracts made and to be performed therein.  Any litigation concerning the subject matter of this Agreement shall be exclusively prosecuted in the state or federal courts located in New York, New York, and all parties consent to the excusive jurisdiction and venue of those courts.

 

16. Headings. The headings contained in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement.

 

17. Attorneys’ Fees. If any action at law or in equity, including an action for declaratory relief, is brought to enforce or interpret the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ fees from the other party (unless such other party is the Escrow Agent), which fees may be set by the court in the trial of such action or may be enforced in a separate action brought for that purpose, and which fees shall be in addition to any other relief that may be awarded.

 

[Signature Page Follows]

 

  

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written.

 

 

GUZOV OFSINK, LLC

By:  ______________________________

        Name:

        Title:

CIGLARETTE, INC.

By:  ______________________________

        Name:

        Title:

PROLIFIC LION LIMITED

By:  ______________________________

        Name:

        Title:

 

 

 

 

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