SECURITIES ESCROW AGREEMENT
THIS
SECURITIES ESCROW AGREEMENT (the “Agreement”),
dated
as of October 3, 2007, is entered into by and among Victory Divide Mining
Company., a Nevada corporation (the “Company”),
Vision Opportunity Master Fund, Ltd., a Cayman Islands company, as
representative of the Purchasers (the “Purchaser
Representative”),
Winner State International Limited, a British Virgin Islands company (the
“Principal
Stockholder”),
and
Loeb & Loeb LLP, with an address at 000 Xxxx Xxxxxx Xxx Xxxx, XX 00000 (the
“Escrow
Agent”).
Capitalized terms used but not defined herein shall have the meanings set forth
in the Purchase Agreement (as defined below).
WITNESSETH:
WHEREAS,
the Purchasers will be purchasing from the Company shares of the Company’s
Series A Convertible Preferred Stock, par value $0.001 per share (the
“Series
A Preferred”),
convertible into shares of the Company’s common stock, par value $0.001 per
share (the “Common
Stock”),
and
certain common stock purchase warrants (the “Warrants”)
pursuant to a Series A Convertible Preferred Stock Purchase Agreement dated
as
of the date hereof (the “Closing
Date”)
by and
among the Company and the Purchasers (the “Purchase
Agreement”);
and
WHEREAS,
the Company and the Purchasers agree that the capitalization table upon which
the transactions contemplated by this Agreement and the Purchase Agreement
are
based is set forth as Schedule
A
hereto;
and
WHEREAS,
as an inducement to the Purchasers to enter into the Purchase Agreement, the
Principal Stockholder has agreed to place the Escrow Shares (as hereinafter
defined) into escrow for the benefit of the Purchasers in the event the Company
fails to achieve the following financial performance thresholds for the 12-month
periods ending December 31, 2007 (“2007”)
and
December 31, 2008 (“2008”):
(a) In
2007,
(i) Earnings Per Share of $0.34, such “Earnings Per Share” to be calculated by
dividing (A) Net Income, as defined in accordance with US GAAP and reported
by
the Company in its audited financial statements for 2007 (the “2007
financial statements”)
plus
any
amounts that may have been recorded as charges or liabilities on the 2007
financial statements due to the application of EITF No. 00-19 that are
associated with (1) any outstanding Warrants of the Company, (2) any issuance
under a performance based stock incentive plan that was in existence on the
Closing Date or (3) the transactions contemplated by this Agreement and Section
7.1 of the Share Exchange Agreement dated as of the date hereof by and between
the Company and Winner State (the “Share
Exchange Agreement”)
(“2007
Net Income”)
by the
Outstanding Shares (as hereinafter defined) and (ii) Cash Earnings Per Share
of
$0.27, such “Cash Earnings Per Share” to be calculated by dividing cash from
operations reported by the Company on the 2007 financial statements, by the
aggregate number of shares of then outstanding Common Stock on a fully-diluted
basis, which number shall include, without limitation, the number of shares
of
Common Stock issuable upon conversion of the Company’s then outstanding shares
of Preferred Stock, par value $0.001 per share and the number of shares of
Common Stock issuable upon the exercise of any then outstanding warrants or
options of the Company, provided,
however,
that
such number shall not include (X) shares of the Company’s Series A Convertible
Preferred Stock, par value $0.001 per share (“Series
A Preferred”)
or
Common Stock issued to the Principal Stockholder pursuant to Section 7.1 of
the
Share Exchange Agreement and (Y) shares of Common Stock issuable upon exercise
of the Company’s Series A Warrants, Series B Warrants, Series C Warrants and
Series D Warrants and issuable upon conversion of the Series B Convertible
Preferred Stock, par value $0.001 that is issuable upon exercise of the
Company’s Series J Warrants, and warrants issued to the Company’s placement
agent in connection with the transactions contemplated by the Purchase
Agreement, dated the date hereof (such number shall be referred to herein as
the
“Outstanding
Shares”)
(the
performance thresholds set forth in (i) and (ii) above shall be collectively
referred to herein as the “2007
Performance Threshold”);
1
(b) In
2008,
(i) Earnings Per Share of $0.43, such “Earnings Per Share” to be calculated by
dividing (A) Net Income, as defined in accordance with US GAAP and reported
by
the Company in its audited financial statements for 2008 (the “2008
financial statements”)
plus
any
amounts that may have been recorded as charges or liabilities on the 2008
financial statements due to the application of EITF No. 00-19 that are
associated with (1) any outstanding Warrants of the Company, (2) any issuance
under a performance based stock incentive plan that was in existence on the
Closing Date or (3) the transactions contemplated by this Agreement and Section
7.1 of the Share Exchange Agreement (“2008
Net Income”)
by the
Outstanding Shares and (ii) Cash Earnings Per Share of $0.37, such “Cash
Earnings Per Share to be calculated by dividing cash from operations reported
by
the Company on the 2008 financial statements by the Outstanding Shares (the
performance thresholds set forth in (i) and (ii) above shall be collectively
referred to herein as the “2008
Performance Threshold”);
and
WHEREAS,
the Company, the Purchaser Representative and the Purchasers 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.
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
I
TERMS
OF
THE ESCROW
1.1. The
parties hereby agree to establish an escrow account with the Escrow Agent
whereby the Escrow Agent shall hold the Escrow Shares as contemplated by this
Agreement.
1.2. Upon
the
execution of this Agreement, the Principal Stockholder shall deliver to the
Escrow Agent stock certificates evidencing one hundred percent (100%) of the
shares of Common Stock underlying the Preferred Shares issuable under the
Purchase Agreement (such shares of Common Stock plus such additional number
of
shares of Common Stock as may be required to be deposited hereunder pursuant
to
Section 1.3(i) or 1.3(ii) hereof shall be collectively referred to in this
Agreement as the “Escrow
Shares”),
along
with updated stock powers executed in blank with signature medallion
guaranteed.
2
1.3. The
parties hereby agree that the 2007 Escrow Shares (as hereinafter defined) shall
be delivered based on the achievement of the 2007 Performance Threshold as
set
forth below:
(i) If
the
Company’s Earnings Per Share and Cash Earnings Per Share for 2007 is less than
50% of the 2007 Performance Threshold, then all of the Escrow Shares (the
“2007
Escrow Shares”)
shall
be distributed on a pro rata basis to the Purchasers based on the number of
shares of Series A Preferred owned by such Purchasers as of the date thereof.
Within five (5) business days of the Purchaser Representative’s receipt of the
2007 financial statements, the Company and the Purchaser Representative shall
provide written instruction to the Escrow Agent instructing the Escrow Agent
to
issue and deliver the 2007 Escrow Shares to the Purchasers on a pro rata basis
to the Purchasers based on the number of shares of Series A Preferred owned
by
such Purchasers as of the date thereof. Within five (5) business days after
the
release of the 2007 Escrow Shares to the Purchasers, the Principal Stockholder
shall deposit into the escrow account maintained by the Escrow Agent, stock
certificates evidencing one hundred percent (100%) of the shares of Common
Stock
underlying the Preferred Shares issuable under the Purchase Agreement.
(ii) If
the
Company’s Earnings Per Share for 2007 is greater than or equal to 50% but less
than 95% of the 2007 Performance Threshold, the Escrow Agent shall deliver
to
the Purchasers, on a pro rata basis based on the number of shares of Series
A
Preferred owned by such Purchasers as of the date thereof, the number of 2007
Escrow Shares multiplied by the percentage by which the 2007 Performance
Threshold was not achieved and multiplied by 200%. By way of example, if the
Company’s Earnings Per Share for 2007 is an amount equal to 60% of the 2007
Performance Threshold, the Purchasers shall receive 200% of the product of
40%
of the 2007 Escrow Shares (100% -60%) and, the remaining Escrow Shares shall
continue to be held in escrow hereunder. Within five (5) business days of the
Purchaser Representative’s receipt of the 2007 financial statements, the Company
and the Purchaser Representative shall provide written instructions to the
Escrow Agent instructing the Escrow Agent to deliver the applicable number
of
2007 Escrow Shares to the Purchasers and to hold the remaining Escrow Shares
in
escrow. Within five (5) business days after the release of the 2007 Escrow
Shares to the Purchasers, the Principal Stockholder shall deposit into the
escrow account maintained by the Escrow Agent, stock certificates evidencing
such number of shares of Common Stock so that the number of Escrow Shares shall
equal the number of shares of Common Stock initially deposited pursuant to
Section 1.2.
(iii) If
the
Company’s Earnings Per Share for 2007 equals or exceeds 95% of the 2007
Performance Threshold, then the Escrow Shares shall continue to be held in
escrow hereunder.
Notwithstanding
anything to the contrary set forth herein, only those Purchasers who own shares
of Series A Preferred acquired under the Purchase Agreement and remain
shareholders of the Company at the time that any 2007 Escrow Shares become
deliverable hereunder shall be entitled to their pro rata portion of such 2007
Escrow Shares calculated based on their ownership interest at the time when
the
2007 Escrow Shares become deliverable hereunder. Any 2007 Escrow Shares not
delivered to Purchasers because the Purchasers no longer hold shares of Series
A
Preferred acquired under the Purchase Agreement shall remain in escrow with
the
Escrow Agent.
3
1.4. The
parties hereby agree that the 2008 Escrow Shares (as hereinafter defined) shall
be delivered based on achievement of the 2008 Performance Threshold as set
forth
below:
(i) If
the
Company’s Earnings Per Share for 2008 is less than 50% of the 2008 Performance
Threshold, then all of the Escrow Shares (the “2008
Escrow Shares”),
shall
be distributed on a pro rata basis to the Purchasers based on the number of
shares of Series A Preferred owned by such Purchasers as of the date thereof.
Within five (5) business days of the Purchaser Representative’s receipt of the
2008 financial statements, the Company and the Purchaser Representative shall
provide written instruction to the Escrow Agent instructing the Escrow Agent
to
issue and deliver the 2008 Escrow Shares to the Purchasers on a pro rata basis
based on the number of shares of Series A Preferred owned by such Purchasers
as
of the date thereof.
(ii) If
the
Company’s Earnings Per Share for 2008 is greater than or equal to 50% but less
than 95% of the 2008 Performance Threshold, (a) the Escrow Agent shall deliver
to the Purchasers, on a pro rata basis based on the number of shares of Series
A
Preferred owned by such Purchasers as of the date thereof, the number of 2008
Escrow Shares equal to the number of 2008 Escrow Shares multiplied by the
percentage by which the 2008 Performance Threshold was not achieved and
multiplied by 200% and (b) the remaining 2008 Escrow Shares shall be returned
to
the Principal Stockholder. By way of example, if the Company’s Earnings Per
Share for 2008 is an amount equal to 60% of the 2008 Performance Threshold, the
Purchasers shall receive 200% of 40% of the 2008 Escrow Shares (100% - 60%)
and
the remaining 2008 Escrow Shares shall be returned to the Principal Stockholder.
Within five (5) business days of the Purchaser Representative’s receipt of the
2008 financial statements, the Company and the Purchaser Representative shall
provide written instructions to the Escrow Agent instructing the Escrow Agent
to
deliver the applicable number of 2008 Escrow Shares to the Purchasers and to
the
Principal Stockholder.
(iii) In
the
event the Company equals or exceeds 95% of the 2008 Performance Threshold,
all
of the 2008 Escrow Shares shall be returned to the Principal Stockholder- at
the
address set forth in Section 5.3 hereof.
Notwithstanding
anything to the contrary set forth herein, only those Purchasers who own shares
of Series A Preferred acquired under the Purchase Agreement and remain
shareholders of the Company at the time that the 2008 Escrow Shares become
deliverable hereunder shall be entitled to their pro rata portion of such 2008
Escrow Shares calculated based on their ownership interest at the time when
such
2008 Escrow Shares become deliverable hereunder. Any 2008 Escrow Shares not
delivered to Purchasers because the Purchasers no longer hold shares of Series
A
Preferred acquired under the Purchase Agreement will be delivered to the
Company.
4
1.5. If
the
Company fails to timely comply with its obligations set forth in Section 3.25
of
the Purchase Agreement (the “Listing
Obligation”),
then
1,000,000 shares of Common Stock owned by the Principal Stockholder (the
“Penalty
Shares”)
shall
be distributed to the Purchasers on a pro rata basis as set forth in Section
3.25 of the Purchase Agreement.
1.6. If
the
Company does not achieve the 2007 Performance Threshold for 2007 or the 2008
Performance Threshold and/or if the Company does not comply with the Listing
Obligation, the Company shall use best efforts to promptly cause the 2007 Escrow
Shares, the 2008 Escrow Shares or the Penalty Shares, as applicable, to be
delivered to the Purchasers, including causing its transfer agent promptly
to
issue the certificates in the names of the Purchasers and causing its securities
counsel to provide any written instruction required by the Escrow Agent in
a
timely manner so that the issuances and delivery contemplated above can be
achieved within five business days following delivery of the 2007 financial
statements or 2008 financial statements in the case of the 2007 Escrow Shares
or
the 2008 Escrow Shares, as applicable, to the Purchaser Representative, or,
within five business days of December 31, 2008, in the case of the Penalty
Shares.
1.7. The
Company will provide the Purchaser Representative with (i) the Company’s audited
financial statements for 2007, prepared in accordance with US GAAP, on or before
March 31, 2008 and (ii) the Company’s audited financial statements for 2008,
prepared in accordance with US GAAP, on or before March 31, 2009, so as to
allow
the Purchaser Representative the opportunity to evaluate whether the 2007
Performance Threshold and the 2008 Performance Threshold were
attained.
1.8. Upon
the
written request of the Company and Purchaser Representative, the Escrow Agent
shall deliver the 2007 Escrow Shares and the 2008 Escrow Shares, as applicable,
to each Purchaser and/or the Principal Stockholder pursuant to the written
instructions of the Company and Purchaser Representative.
ARTICLE
II
REPRESENTATIONS
OF THE PRINCIPAL STOCKHOLDER
2.1. The
Principal Stockholder hereby represents and warrants to the Purchasers and
the
Purchaser Representative as follows:
(i) The
Escrow Shares placed into escrow hereunder by the Principal Stockholder are
validly issued, fully paid and nonassessable shares of the Company. The
Principal Stockholder is the record and beneficial owner of the Escrow Shares
placed into escrow pursuant to this Agreement by the Principal Stockholder
and
has good title to such Escrow Shares, free and clear of all pledges, liens,
claims and encumbrances, except encumbrances created by this Agreement. There
are no restrictions on the ability of the Principal Stockholder to transfer
the
Escrow Shares placed into escrow pursuant to this Agreement by the Principal
Stockholder or to enter into this Agreement other than transfer restrictions
under applicable federal and state securities laws. Upon any delivery of Escrow
Shares placed into escrow pursuant to this Agreement by the Principal
Stockholder to the Purchasers hereunder, the Purchasers will acquire good and
valid title to such Escrow Shares, free and clear of any pledges, liens, claims
and encumbrances.
5
(ii) The
performance of this Agreement and compliance with the provisions hereof will
not
violate any provision of any law applicable to the Principal Stockholder and
will not conflict with or result in any breach of any of the terms, conditions
or provisions of, or constitute a default under, or result in the creation
or
imposition of any lien, charge or encumbrance upon, any of the properties or
assets of the Principal Stockholder pursuant to the terms of the certificate
of
incorporation or by-laws of the Company or any indenture, mortgage, deed of
trust or other agreement or instrument binding upon the Principal Stockholder
or
affecting the Escrow Shares. No notice to, filing with, or authorization,
registration, consent or approval of any governmental authority or other person
is necessary for the execution, delivery or performance of this Agreement or
the
consummation of the transactions contemplated hereby by the Principal
Stockholder.
ARTICLE
III
COVENANTS
3.1. [Intentionally
Omitted.]
3.2. [Intentionally
Omitted.]
ARTICLE
IV
MISCELLANEOUS
4.1. The
Company will pay Escrow Agent a total of $1,000 for all services rendered by
Escrow Agent hereunder.
4.2. No
waiver
or 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 an extension of the time for performance
of
any other obligation or act.
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 4), 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.
6
If
to
Escrow Agent: Loeb & Loeb LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxxx Xxxxxxxx, Esq
Tel
No.:000-000-0000
Fax
No.:
000-000-0000
If
to the
Company or the Principal Stockholder:
Victory
Divide Mining Company.
c/o
Winner State International Limited
Attention:
Xxxxxx Xxx
Tel.
No.:
00-000-000-0000
Fax
No.:
00-000-000-0000
With
a
copy to:
Guzov
Ofsink, LLC
000
Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxx
Tel.
No.:
(000) 000-0000, ext. 127
Fax
No.:
(000) 000-0000
If
to the
Purchaser
Vision
Opportunity Master Fund, Ltd.
Representative:
00
X.
00xx Xxxxxx, 0xx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx Xxx
Tel.
No.:
(000) 000-0000
Fax
No.:
(000) 000-0000
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.
4.3. This
Escrow Agreement shall be binding upon and shall inure to the benefit of the
permitted successors and permitted assigns of the parties hereto.
4.4. This
Escrow 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 Escrow 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.
7
4.5. Whenever
required by the context of this Escrow Agreement, the singular shall include
the
plural and masculine shall include the feminine. This Escrow Agreement shall
not
be construed as if it had been prepared by one of the parties, but rather as
if
both parties had prepared the same. Unless otherwise indicated, all references
to Articles are to this Escrow Agreement.
4.6. The
parties hereto expressly agree that this Escrow Agreement shall be governed
by,
interpreted under and construed and enforced in accordance with the laws of
the
State of New York, without regard to conflicts of law principles that would
result in the application of the substantive laws of another jurisdiction.
Any
action to enforce, arising out of, or relating in any way to, any provisions
of
this Escrow Agreement shall only be brought in a state or Federal court sitting
in New York City, Borough of Manhattan.
4.7. The
Escrow Agent’s duties hereunder may be altered, amended, modified or revoked
only by a writing signed by the Company, the Principal Stockholder, the
Purchaser Representative and the Escrow Agent.
4.8. 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 in the absence of gross negligence, fraud and willful misconduct,
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, in the
absence of gross negligence, fraud and willful misconduct.
4.9. 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.
4.10. The
Escrow Agent shall not be liable in any respect on account of the identity,
authorization or rights of the parties executing or delivering or purporting
to
execute or deliver any documents or papers deposited or called for thereunder
in
the absence of gross negligence, fraud and willful misconduct.
4.11. The
Escrow Agent shall be entitled to employ such legal counsel and other experts
as
the Escrow Agent may deem necessary properly to advise the Escrow Agent in
connection with the Escrow Agent’s duties hereunder, may rely upon the advice of
such counsel, and may pay such counsel reasonable compensation therefor which
shall be paid by the Escrow Agent. The
Escrow Agent has acted as legal counsel for one of the Purchasers and may
continue to act as legal counsel for such Purchaser from time to time,
notwithstanding its duties as the Escrow Agent hereunder. The Company and the
Purchasers consent to the Escrow Agent in such capacity as legal counsel for
one
of the Purchasers and waive any claim that such representation represents a
conflict of interest on the part of the Escrow Agent. The Company and the
Purchasers understand that the Escrow Agent is relying explicitly on the
foregoing provision in entering into this Escrow
Agreement.
8
4.12. The
Escrow Agent’s responsibilities as escrow agent hereunder shall terminate if the
Escrow Agent shall resign by giving written notice to the Company and the
Purchasers. In the event of any such resignation, the Purchasers and the Company
shall appoint a successor Escrow Agent and the Escrow Agent shall deliver to
such successor Escrow Agent any escrow funds and other documents held by the
Escrow Agent.
4.13. If
the
Escrow Agent reasonably requires other or further instruments in connection
with
this Escrow Agreement or obligations in respect hereto, the necessary parties
hereto shall join in furnishing such instruments.
4.14. 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 or the Escrow Shares
held by the Escrow Agent hereunder, the Escrow Agent is authorized and directed
in the Escrow Agent’s sole discretion (1) to retain in the Escrow Agent’s
possession without liability to anyone all or any part of said documents or
the
Escrow Shares until such disputes shall have been settled either by mutual
written agreement of the parties concerned by a final order, decree or judgment
or 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 (2) 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 City of New York, Borough of Manhattan, in
accordance with the applicable procedure therefor.
4.15. The
Company agrees to indemnify and hold harmless the Escrow Agent and its partners,
employees, agents and representatives from any and all claims, liabilities,
costs or expenses in any way arising from or relating to the duties or
performance of the Escrow Agent hereunder or the transactions contemplated
hereby or by the Purchase Agreement other than any such claim, liability, cost
or expense to the extent the same shall have been determined by final,
unappealable judgment of a court of competent jurisdiction to have resulted
from
the gross negligence, fraud or willful misconduct of the Escrow
Agent.
[Signature
Page Follows]
9
[SIGNATURE
PAGE TO SECURITIES ESCROW AGREEMENT]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of this
3rd
day of October, 2007.
By:
/s/
Xxxxxx Xxx
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
PURCHASER
REPRESENTATIVE:
VISION
OPPORTUNITY MASTER FUND, LTD.
By:
/s/
Xxxx Xxxxxxxx
Name:
Xxxx Xxxxxxxx
Title:
Director
ESCROW
AGENT:
Loeb
& Loeb LLP
By:
/s/
Xxxxxxxx X. Xxxxxxxx
Name:
Xxxxxxxx X. Xxxxxxxx
Title:
Partner
PRINCIPAL
STOCKHOLDER:
WINNER
STATE INTERNATIONAL LIMITED
By:
/s/
Xxxxxx Xxx
Name:
Xxxxxx Xxx
Title:
Chief Executive Officer
10
Schedule
A
Capitalization
Table
|
Yanglin
Capitalization Table
|
|||||||||||||||||||||||||||||||||||||||||||
|
Post
Deal Shares in Victory Divide Mining Company
|
|||||||||||||||||||||||||||||||||||||||||||
|
Amount
Invested
|
|
Common
Stock
|
|
Series
A Preferred
|
Series
B Preferred potentially issuable if Series J Exercised
|
|
Series
A Warrants
|
|
Series
B Warrants
|
|
Setries
J Warrants
|
|
Series
C Warrants
|
|
Series
D Warrants
|
|
Series
E Warrants
|
|
Series
F Warrants
|
|
%
of Outstanding Common
|
|
%
of Outstanding Assuming Preferred is Converted
|
|
%
Fully Diluted
|
||||||||||||||||||
|
Winner
State International Limited
|
18,200,000
|
91.00
|
%
|
60.67
|
%
|
24.66
|
%
|
||||||||||||||||||||||||||||||||||||
|
Beneficial
Ownership
|
|||||||||||||||||||||||||||||||||||||||||||
|
Xxxxxx
Xxx
|
9,100,000
|
||||||||||||||||||||||||||||||||||||||||||
|
Huanqin
Ding
|
9,100,000
|
||||||||||||||||||||||||||||||||||||||||||
|
Investors
|
$
|
21,500,000.00
|
525,000
|
10,000,000
|
7,801,268
|
10,000,000
|
5,000,000
|
7,801,268
|
7,801,268
|
3,900,634
|
0
|
0
|
2.63
|
%
|
35.08
|
%
|
71.58
|
%
|
|||||||||||||||||||||||||
|
Vision
Opportunity Master Fund, Ltd.
|
$
|
8,000,000.00
|
525,000
|
3,720,930
|
3,382,664
|
3,720,930
|
1,860,465
|
3,382,664
|
3,382,664
|
1,691,332
|
2.63
|
%
|
14.15
|
%
|
29.36
|
%
|
|||||||||||||||||||||||||||
|
Sansar
Capital Special Opportunity Master Fund, LP (Cayman
Master)
|
$
|
5,950,000.00
|
2,767,442
|
2,515,856
|
2,767,442
|
1,383,721
|
2,515,856
|
2,515,856
|
1,257,928
|
0.00
|
%
|
9.22
|
%
|
21.31
|
%
|
||||||||||||||||||||||||||||
|
Vicis
Capital Master Fund
|
$
|
4,500,000.00
|
2,093,023
|
1,902,748
|
2,093,023
|
1,046,512
|
1,902,748
|
1,902,748
|
951,374
|
0.00
|
%
|
6.98
|
%
|
16.11
|
%
|
||||||||||||||||||||||||||||
|
Precept
Capital Master Fund, GP
|
$
|
500,000.00
|
232,558
|
232,558
|
116,279
|
0.00
|
%
|
0.78
|
%
|
0.79
|
%
|
||||||||||||||||||||||||||||||||
|
Penn
Footwear
|
$
|
250,000.00
|
116,279
|
116,279
|
58,140
|
0.00
|
%
|
0.39
|
%
|
0.39
|
%
|
||||||||||||||||||||||||||||||||
|
Crescent
International Ltd.
|
$
|
300,000.00
|
139,535
|
139,535
|
69,767
|
0.00
|
%
|
0.47
|
%
|
0.47
|
%
|
||||||||||||||||||||||||||||||||
|
Benefit
Grand Investments Limited
|
$
|
500,000.00
|
232,558
|
232,558
|
116,279
|
0.00
|
%
|
0.78
|
%
|
0.79
|
%
|
||||||||||||||||||||||||||||||||
|
Golden
Bridge Asset Management
|
$
|
1,000,000.00
|
465,116
|
465,116
|
232,558
|
0.00
|
%
|
1.55
|
%
|
1.58
|
%
|
||||||||||||||||||||||||||||||||
|
Xxxxxx
X Xxxxxxxx
|
$
|
250,000.00
|
116,279
|
116,279
|
58,140
|
0.00
|
%
|
0.39
|
%
|
0.39
|
%
|
||||||||||||||||||||||||||||||||
|
Xxxxxxx
Road Partners, LP
|
$
|
250,000.00
|
116,279
|
116,279
|
58,140
|
0.00
|
%
|
0.39
|
%
|
0.39
|
%
|
||||||||||||||||||||||||||||||||
|
Xxxxx
Brothers Securities, Inc.
|
487,500
|
1,000,000
|
2.44
|
%
|
1.63
|
%
|
2.02
|
%
|
|||||||||||||||||||||||||||||||||||
|
Public
Shareholders//Xxxxx Xxxxxx
|
487,500
|
2.44
|
%
|
1.63
|
%
|
0.66
|
%
|
||||||||||||||||||||||||||||||||||||
|
Mass
Harmony Assets
|
300,000
|
500,000
|
1.50
|
%
|
1.00
|
%
|
1.08
|
%
|
|||||||||||||||||||||||||||||||||||
|
Totals
|
$
|
21,500,000
|
20,000,000
|
10,000,000
|
7,801,268
|
10,000,000
|
5,000,000
|
7,801,268
|
7,801,268
|
3,900,634
|
1,000,000
|
500,000
|
100.00
|
%
|
100.00
|
%
|
100.00
|
%
|
|||||||||||||||||||||||||
|
Legend
|
||||
|
Series
A Convertible Preferred Stock - Convertible into common at
the option of
the holder 1:1. Price per share
|
$
|
2.15
|
||
|
Series
A Warrants - five year term with an exercise price of
|
$
|
2.75
|
||
|
Series
B Warrants - five year term with an exercise price of
|
$
|
3.50
|
||
|
Series
J Warrants - 18 month term with an exercise price of
|
$
|
2.37
|
||
|
Series
C Warrants - five year term with an exercise price of
|
$
|
3.03
|
||
|
Series
D Warrants - five year term with an exercise price of
|
$
|
3.85
|
||
|
Series
E Warrants - only for the placement agent - five year term
with an
exercise price of
|
$
|
2.58
|
||
|
Series
F Warrants - only for Mass Harmony Assets, the financial cousulting
firm -
five year term with an exercise price of
|
$
|
3.01
|
||
|
Total
Common Outstanding Post-Reverse and Post-Finacing
|
20,000,000
|
|||
|
Total
Series A Preferred Stock to be sold
|
10,000,000
|
|||
|
Fully
Diluted Calculation Assumes the Conversion of all preferred
and exercise
of all warrant for outstanding shares of
|
73,804,440
|
|||
11
