SHARE ESCROW AGREEMENT
THIS
SHARE ESCROW AGREEMENT (“Agreement”),
is
made as of October 14, 2008, by and between China Bio Energy Holding Group
Co.,
Ltd. (the “Company”),
the
Purchaser whose name is set forth on Exhibit
A
to the
Securities Purchase Agreement, dated this same date (the “Purchaser”
and
together with the Company, the “Parties”),
Redsky Group Limited, a British Virgin Islands company (“Redsky
Group”),
and
Loeb & Loeb LLP, with offices at 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000 (the
“Escrow
Agent”).
RECITALS:
(1)
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Pursuant
to that certain Securities Purchase Agreement, dated as of October
14,
2008, by and between the Company and the Purchaser (the “Purchase
Agreement”),
a copy of which is attached hereto as Exhibit
A
and incorporated herein by reference, the Company issued to the Purchaser
a convertible debenture in the amount of $9,000,000, which is
automatically convertible into 2,465,753 shares of the Company’s Series B
Convertible Preferred Stock, subject to adjustment pursuant to the
Certificate of Designation of the Relative Rights and Preferences
of the
Series B Convertible Preferred Stock, and is referred to herein as
the
“Convertible
Debenture”).
Capitalized terms used in this Agreement without definition, have
the
meaning assigned to those terms in the Purchase Agreement;
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(2)
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To
induce the Purchaser to enter into the Purchase Agreement, Redsky
Group
Limited, a British Virgin Islands company (“Redsky
Group”),
the majority stockholder of the Company, has agreed to deposit 2,465,753
shares of the Company’s Common Stock it owns (“Escrow
Shares”),
into an escrow account to be held by the Escrow Agent to be disbursed
in
accordance with the terms and conditions set forth herein, (the
“Escrow
Account”);
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(3)
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The
Company and the Purchaser have requested that the Escrow Agent hold
the
Escrow Shares 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.
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NOW,
THEREFORE, in consideration of the covenants and mutual promises contained
herein and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged and intending to be legally bound
hereby, the Parties agree as follows:
ARTICLE
1
TERMS
OF
THE ESCROW
1.1 Appointment
of Escrow Agent.
The
Parties hereby agree to have Loeb & Loeb LLP act as Escrow Agent to receive
the Escrow Shares in escrow and distribute the same as set forth in this
Agreement.
1.2 Escrow
Deposit.
In
accordance with the terms of the Purchase Agreement, immediately prior to the
Closing, Redsky Group shall deliver the Escrow Shares to the Escrow Agent.
The
Escrow Agent shall hold the Escrow Shares in the Escrow Account at all times
until such Escrow Shares are disbursed in accordance herewith;
1.3 Performance
Thresholds
(a) The
performance thresholds for the fiscal year ended December 31, 2008 shall be
audited Net Income equal to $28,000,000 and Fully Diluted Earnings Per Share
(as
defined below) equal to $0.73 (the “Performance
Thresholds”).
(b) Whether
the Performance Thresholds have been met shall be determined on the date the
Company’s audited financial statements for the corresponding fiscal year are
filed with the Securities and Exchange Commission pursuant to the reporting
requirements of the Securities Exchange Act of 1934 (the “Exchange
Act”),
as
amended, which includes any extensions with respect thereof pursuant to Rule
12b-25 of the Exchange Act (such date being hereinafter referred to as the
“Audit
Date”);
and,
if the Company is not required to file reports pursuant to Section 13(a) or
15(d) of the Exchange Act, and therefore prepares and furnishes the documents
required by Section 6 of the Registration Rights Agreement, the Performance
Thresholds shall be determined in accordance with such prepared documents and
at
such time.
(c) With
respect to the Performance Thresholds, “Net Income” shall be defined in
accordance with US GAAP and reported by the Company in its audited financial
statements for 2008, plus
any
amounts that may have been recorded as non-cash charges or liabilities on the
2008 financial statements, respectively, due to the application of EITF No.
00-19 that are associated with (i) any outstanding Warrants of the Company,
(ii)
the transactions contemplated by this Agreement, including, without limitation
the release of any Escrow Shares to Redsky Group, (iii) any issuance of shares
of Common Stock or option grants under a performance based stock incentive
plan
that was in existence on the Closing Date, and (iv) the conversion of any shares
of preferred stock. “Fully Diluted Earnings Per Share” means after tax Net
Income divided by the number of shares of Common Stock outstanding on a fully
diluted basis, which number of shares of Common Stock shall include, without
limitation, (x) the number of shares of Common Stock issuable upon conversion
of
the Company’s then outstanding shares of Series A Preferred and Series B
Preferred, and (y) the number of shares of Common Stock issuable upon the
exercise of any then outstanding warrants, options or other securities
convertible into shares of Common Stock of the Company, as of December 31,
2008.
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1.4 Escrow
Release
The
Purchaser shall remit written instructions to the Escrow Agent two (2) business
days after the Audit Date, in the form of Exhibit
B
attached
hereto and made a part hereof, or in a form and substance satisfactory to the
Escrow Agent (the “Release
Notice”),
directing the Escrow Agent to release the Escrow Shares within five (5) business
days of the Escrow Agent’s receipt of the Release Notice as specified therein
and in accordance with the following guidelines :
(a)
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If
the Company achieves no more than 50% of the Performance Thresholds,
the
Escrow Agent shall disburse all of the Escrow Shares to the
Purchaser.
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(b)
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If
the Company achieves more than 50% and less than 100% of the Performance
Thresholds, the Escrow Agent shall disburse to the Purchaser that
number
of Escrow Shares equal to two (2) times the percentage by which the
Lowest
Performance Threshold was not achieved. For purposes hereof, the
“Lowest
Threshold Percentage”
means the percentage by which the lowest of the Performance Thresholds
was
not achieved. By way of example, if the Company’s Fully Diluted Earnings
Per Share is an amount equal to 60% of the Performance Thresholds
and the
Company’s Net Income reported on is an amount equal to 70% of the
Performance Thresholds, the Lowest Threshold Percentage would be
40%
(100%-60%). The Escrow Agent would disburse 80% of the Escrow Shares
to
the Purchasers (40*2).
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(c)
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In
the event that the Company does not achieve the specified percentage
of
the Performance Thresholds as set forth in 1.4(a) and 1.4(b) above
and the
Purchaser sells any of its Series B Preferred Stock and/or Common
Conversion Shares prior to the date of distribution of Escrow Shares,
then
the Purchaser shall only be entitled to receive that number of Escrow
Shares equal to the sum of the number of shares of Series B Preferred
Stock (on an as converted basis) and Common Conversion Shares owned
by
such Purchaser as of the date of distribution. Any Escrow Shares
not
delivered to the Purchaser because the Purchaser has sold any portion
of
such Purchaser’s Series B Preferred or Conversion Shares will be released
to Redsky Group.
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(d)
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If
the Performance Thresholds are achieved, all of the Escrow Shares
shall be
returned to Redsky Group.
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(e)
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In
the event that the Closing of the transactions contemplated by the
Purchase Agreement does not occur, and written notice of same, signed
by
all
of
the Parties hereto, is delivered to the Escrow Agent, the Escrow
Agent
shall return the Escrow Shares to Redsky Group.
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(f)
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Upon
the Escrow Agent’s completion of its obligations under Sections 1.4, this
Agreement shall terminate and the Escrow Agent shall have no further
liability hereunder.
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1.5 This
Agreement may be altered or amended only with the written consent of all of
the
Parties hereto. Should any of the Parties attempt to change this Agreement
in a
manner, which, in the Escrow Agent’s discretion, shall be undesirable, the
Escrow Agent may resign as Escrow Agent by notifying the Parties in writing
five
days in advance. In the case of the Escrow Agent’s resignation or removal
pursuant to the foregoing, his only duty, until receipt of notice from the
Parties that a successor escrow agent has been appointed, shall be to hold
and
preserve the Escrow Shares that are in his possession. Upon receipt by the
Escrow Agent of said notice from the Parties of the appointment of a successor
escrow agent, the name of a successor escrow account and a direction to transfer
the Escrow Shares, the Escrow Agent shall promptly thereafter transfer all
of
the Escrow Shares that it is still holding in escrow, to said successor escrow
agent. Immediately after said transfer of the Escrow Shares, the Escrow Agent
shall furnish the Parties with proof of such transfer. The Escrow Agent is
authorized to disregard any notices, requests, instructions or demands received
by it from the Parties after the Escrow Agent promptly transfers all of the
Escrow Shares that it is still holding in escrow, to the above said successor
escrow agent.
1.6
The
Escrow Agent shall be reimbursed by the Parties for any reasonable expenses
incurred in the event there is a conflict between the Parties and the Escrow
Agent shall deem it necessary to retain counsel, upon whose advice the Escrow
Agent may rely. The Escrow Agent shall not be liable for any action taken or
omitted by him in good faith and in no event shall the Escrow Agent be liable
or
responsible except for the Escrow Agent’s own gross negligence or willful
misconduct. The Escrow Agent has made no representations or warranties to the
Parties in connection with this transaction. The Escrow Agent has no liability
hereunder to either party other than to hold the Escrow Shares and to deliver
them under the terms hereof. Each party hereto agrees to indemnify and hold
harmless the Escrow Agent from and with respect to any suits, claims, actions
or
liabilities arising in any way out of this transaction including the obligation
to defend any legal action brought which in any way arises out of or is related
to this Agreement or the investment being made by Purchaser. The
Escrow Agent has acted as legal counsel for the Company and may continue to
act
as legal counsel for the Company from time to time, notwithstanding its duties
as the Escrow Agent hereunder. The Company and the Purchaser consent to the
Escrow Agent in such capacity as legal counsel for the Company and waive any
claim that such representation represents a conflict of interest on the part
of
the Escrow Agent. The Company and the Purchaser understand that the Escrow
Agent
is relying explicitly on the foregoing provision in entering into this Share
Escrow Agreement.
1.7 The
Escrow Agent shall be obligated only for the performance of such duties as
are
specifically set forth herein and may rely and shall be protected in relying
or
refraining from acting on any instrument reasonably believed by the Escrow
Agent
to be genuine and to have been signed or presented by the proper Party or
Parties. The Escrow Agent shall not be personally liable for any act the Escrow
Agent may do or omit to do hereunder as the Escrow Agent while acting in good
faith, and any act done or omitted by the Escrow Agent pursuant to the advice
of
the Escrow Agent's attorneys-at-law shall be conclusive evidence of such good
faith.
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1.8 The
Escrow Agent is hereby expressly authorized to disregard any and all warnings
given by any of the Parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and is hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In
case the Escrow Agent obeys or complies with any such order, judgment or decree,
the Escrow Agent shall not be liable to any of the Parties hereto or to any
other person, firm or corporation by reason of such decree being subsequently
reversed, modified, annulled, set aside, vacated or found to have been entered
without jurisdiction.
1.9 The
Escrow Agent shall not be liable in any respect on account of the identity,
authorities or rights of the Parties executing or delivering or purporting
to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
1.10 If
the
Escrow Agent reasonably requires other or further documents in connection with
this Agreement, the necessary Parties hereto shall join in furnishing such
documents.
1.11 It
is
understood and agreed that should any dispute arise with respect to the delivery
and/or ownership or right of possession of the documents, the Escrow Shares
held
by the Escrow Agent hereunder, the Escrow Agent is authorized and directed
in
the Escrow Agent's sole discretion (a) to retain in the Escrow Agent's
possession without liability to anyone all or any part of said documents, the
Escrow Shares until such disputes shall have been settled either by mutual
written agreement of the Parties concerned or by a final order, decree or
judgment of a court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but the Escrow Agent shall be under
no
duty whatsoever to institute or defend any such proceedings or (b) to deliver
the Escrow Shares and any other property and documents held by the Escrow Agent
hereunder to a state or federal court having competent subject matter
jurisdiction and located in the State of New York in accordance with the
applicable procedure therefor.
ARTICLE
2
MISCELLANEOUS
2.1 No
waiver
of any breach of any covenant or provision herein contained shall be deemed
a
waiver of any preceding or succeeding breach thereof, or of any other covenant
or provision herein contained. No extension of time for performance of any
obligation or act shall be deemed any extension of the time for performance
of
any other obligation or act.
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2.2 All
notices, demands, consents, requests, instructions and other communications
to
be given or delivered or permitted under or by reason of the provisions of
this
Agreement or in connection with the transactions contemplated hereby shall
be in
writing and shall be deemed to be delivered and received by the intended
recipient as follows: (i) if personally delivered, on the business day of such
delivery (as evidenced by the receipt of the personal delivery service), (ii)
if
mailed certified or registered mail return receipt requested, two (2) business
days after being mailed, (iii) if delivered by overnight courier (with all
charges having been prepaid), on the business day of such delivery (as evidenced
by the receipt of the overnight courier service of recognized standing), or
(iv)
if delivered by facsimile transmission, on the business day of such delivery
if
sent by 6:00 p.m. in the time zone of the recipient, or if sent after that
time,
on the next succeeding business day (as evidenced by the printed confirmation
of
delivery generated by the sending party’s telecopier machine). If any notice,
demand, consent, request, instruction or other communication cannot be delivered
because of a changed address of which no notice was given (in accordance with
this Section 2.2), or the refusal to accept same, the notice, demand, consent,
request, instruction or other communication shall be deemed received on the
second business day the notice is sent (as evidenced by a sworn affidavit of
the
sender). All such notices, demands, consents, requests, instructions and other
communications will be sent to the following addresses or facsimile numbers
as
applicable.
If
to Escrow Agent:
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Loeb
& Loeb LLP
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000
Xxxx Xxxxxx
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Xxx
Xxxx, Xxx Xxxx 00000
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Attention:
Xxxxxxxx Xxxxxxxx, Esq.
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Tel
No.:000-000-0000
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Fax
No.: 000-000-0000
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If
to the Company or Redsky Group:
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c/oXi'an
Baorun Industrial Development Co. Ltd.
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Dongxin
Century Square, 7th Floor
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Xi'an
East Xxxx Xxxx-tech Industrial Development Park
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Shannxi
Province, P.R. China
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Attn:
Xx. Xxx Xincheng
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Tel:
00 00 00000000
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Fax:
00 00 00000000
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With
a copy to:
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Loeb
& Loeb LLP
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000
Xxxx Xxxxxx
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Xxx
Xxxx, Xxx Xxxx 00000
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Attention:
Xxxxxxxx Xxxxxxxx, Esq
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Tel
No.:000-000-0000
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Fax
No.: 000-000-0000
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If
to the Purchaser
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Vision
Opportunity China LP
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00
X. 00xx Xxxxxx, 0xx Xxxxx
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Xxx
Xxxx, Xxx Xxxx 00000
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Attention:
Xxx Xxxxxxx
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Tel.
No.: 000-000-0000
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Fax
No.: 000-000-0000
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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.
2.3 This
Agreement shall be binding upon and shall inure to the benefit of the permitted
successors and assigns of the Parties hereto.
2.4
This
Agreement is the final expression of, and contains the entire agreement between,
the Parties with respect to the subject matter hereof and supersedes all prior
understandings with respect thereto. This Agreement may not be modified,
changed, supplemented or terminated, nor may any obligations hereunder be
waived, except by written instrument signed by the Parties to be charged or
by
its agent duly authorized in writing or as otherwise expressly permitted
herein.
2.5 Whenever
required by the context of this Agreement, the singular shall include the plural
and masculine shall include the feminine. This Agreement may be executed in
two
or more counterparts, all of which taken 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. Such facsimile
copies shall constitute enforceable original documents.
2.6 The
Parties hereto expressly agree that this Agreement shall be governed by,
interpreted under, and construed and enforced in accordance of the laws of
the
State of New York. The Parties agree that any dispute arising under or with
respect to or in connection with this Agreement, whether during the term of
this
Agreement or at any subsequent time, shall be resolved fully and exclusively
in
the federal or state courts resident in New York County, New York.
2.7 By
signing this Agreement, the Escrow Agent becomes a party hereto only for the
purpose of this Agreement; the Escrow Agent does not become a party to the
Purchase Agreement or any related agreements.
2.8 Each
party acknowledges and agrees that this Agreement shall not be deemed prepared
or drafted by any one party. In the event of any dispute between the Parties
concerning this Agreement, the Parties agree that any rule of construction,
to
the effect that any ambiguity in the language of the Agreement is to be resolved
against the drafting party, shall not apply.
(Signature
Page to Follow)
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IN
WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date
first set forth above.
Executed:
By:
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/s/ Gao Xincheng |
Name:
Gao Xincheng
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Title:
Chief Executive Officer
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Vision
Opportunity China LP
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By:
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/s/ Xxxx Xxxxxxxx |
Name:
Xxxx Xxxxxxxx
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Title:
Authorized Signatory
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Redsky
Group Limited
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By:
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/s/ Gao Xincheng |
Name:
Gao Xincheng
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Title:
Director
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Escrow
Agent:
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Loeb
& Loeb LLP
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By:
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/s/ Xxxxxxxx X. Xxxxxxxx |
Name:
Xxxxxxxx X. Xxxxxxxx
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Title:
Partner
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Exhibit
A
Vision
Opportunity China LP
9
Exhibit
B
FORM
OF ESCROW RELEASE NOTICE
Date:
Escrow
Agent
Dear
Escrow Agent:
In
accordance with the terms of Article 1 of the Escrow Agreement dated as of
October 14, 2008 (the "Escrow Agreement"), by and between China Bio Energy
Holding Group Co., Ltd. (the “Company”), the Purchaser whose name is set forth
on Exhibit A to the Securities Purchase Agreement dated October __, 2008 (the
“Purchaser,”
and
together with the Company, the “Parties”), the Purchaser hereby notify the
Escrow Agent of the following:
1.
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The
Audit Date was ___________ __, 200__; and
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2.
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The
Company achieved __% of the Performance Thresholds.
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Accordingly,
please distribute the Escrow Shares as follows:
Recipient
Information
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Amount
of Escrow Shares to be
delivered |
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Very
truly yours,
VISION
OPPORTUNITY CHINA LP
By:_____________
Name:__________
Title:___________
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